The Price-Specie-Flow Mechanism Will Work Only If Governments Are Willing

question 40

Multiple Choice

The price-specie-flow mechanism will work only if governments are willing to play by the rules of the game by letting the money stock rise and fall as gold flows in and out.Once the government demonetizes (neutralizes) gold,the mechanism will break down.In addition,the effectiveness of the mechanism depends on

• A)the income elasticity of the demand for imports.
• B)the price elasticity of the demand for imports.
• C)the price elasticity of the supply of imports.
• D)the income elasticity of the supply of imports.

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