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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Definitions:

Perfectly Competitive Firms

Businesses operating in a market where no single buyer or seller has the power to influence prices, and products are homogeneous, resulting in many sellers and buyers.

Industry Output

Industry Output is the total product or service produced within an industry, which is a key indicator of economic activity and health.

Government

The governing body of a nation, state, or community, charged with regulating and administering public policy and affairs.

Essential Resource

A necessary input or resource that is fundamental for the functioning and sustainability of an economy or ecosystem.