Using the Economic Way of Thinking,explain Why Colonists Believed a Shortage

question 22

Essay

Using the economic way of thinking,explain why colonists believed a shortage of money could negatively impact their economy.Use the quantity theory of money (MV ? PQ)to explain why?a shortage of colonial money could either lead to negative economic growth (decrease in Q)or deflation (a decrease in P).Assume velocity (V)is stable or constant.According to the research of economic historians,did colonial America experience positive or negative growth? Did colonists experience inflation or deflation in the years leading up to the American Revolution? Does this evidence support the claim that there was a shortage of money in colonial America?

---

Definitions:

Forward Rate

The interest rate agreed upon today for a loan that will occur at a future date, used in the calculation of the yield curve and in the pricing of forward contracts.

Canadian Security

A financial instrument issued in Canada, such as stocks, bonds, or investment funds.

Exchange Rate

The worth of a currency when exchanged for a different one.

Risk-Free Rate

The theoretical rate of return on an investment with no risk of financial loss, often represented by the yield on government securities.