ECON: MACRO4
ECON: MACRO4
4th Edition
ISBN: 9781305436862
Author: William A. McEachern
Publisher: Cengage Learning
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Chapter 7, Problem 3.6PA
To determine

Sources of inflation using aggregate demand and aggregate supply.

Introduction:

Aggregate demand is the total consumption (spending) of (on) the goods and services in the economy.

Aggregate supply is the total quantity of the goods and services produced in the economy.

Inflation refers to the percentage increase in the prices of the goods and services in the economy over the period of time.

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Florin and Guilder are two countries separated by a narrow sea. They use currencies called, respectively, the Flop and the Gulp. Suppose the nominal exchange rate is 20 Flops per Gulp. A Guilderian trader buys a 120 Flop barrel of Florish pickles by exchanging 6 Gulps, and a Florish trader buys a 4 Gulp crate of Guilderian apples by exchanging 80 Flops. Then the Gulp depreciates to 10 Flops per Gulp. Instructions: Enter your answers as whole numbers. How much must the Guilderian pay for the same 120 Flop barrel of pickles?  Gulps How much must the Florish trader pay for the same 4 Gulp crate of apples?  Flops
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