Macroeconomics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN: 9781305506756
Author: James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher: Cengage Learning
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Question
Chapter ST6, Problem 1CQ
To determine
The stock market crash in 1929.
Expert Solution & Answer
Explanation of Solution
During 1920s, the stock market grows up rapidly. It hits the history of growth and achieves its peak level. Due to this rapid growth, many normal consumers will bring a large number of stocks. This is because they expected a huge profit from it. However, they do not have an adequate cash balance with them to purchase it. Then they buy it from its margin and take loan from the banks or some from the brokers. However, these excess flow of money in the economy will force the Federal Reserve to increase the interest rate and to protect the gold standard in the bank of Country E to raise their rates. The Wall Street journal makes features about the marginal buyers of stock, Leading to create a panic situation and form a bear market. These worsen the situations and lead to a stock market crash. This is considered as a main reason of great depression in Country U.
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Students have asked these similar questions
The idea that a country can experience gains from trade means that it can
A) consume at a point outside its production possibilities frontier.
B) increase its exports.
C) increase the efficiency of its production.
D) experience a bowed-out production possibilities frontier.
A country is likely to have a comparative advantage in a land-intensive activity if it has a
A) alot of land relative to its population.
B) large population relative to its landmass.
C) higher opportunity cost of producing technology.
D) large amount of capital equipment relative to its population.
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
Chapter ST6 Solutions
Macroeconomics: Private and Public Choice (MindTap Course List)
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