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Q2a) Farrell discusses three main issues in chapter five. They being the downsides and fears of large businesses, the central bank and the small farmers and workers. The large business sectors and government controlled industries place hardships on the working class and the small farmers. This is also known as the destructive side.
Creativity was also one sided. The large industries run by the government opposed the idea of the populist movement, because this would allow workers to become more independent and pay off their debts at a greater and more successful rate. It was only until the 1930’s that the government decided to create “new deal” jobs for the people, increase government spending, help people get out of poverty and allow them to rejoin the workforce for he first time in almost 10 years.
The next part Farrell deals with is the fear many people had about a centralized bank. People were scared that by having a central bank in place there would be a possible a slow down in the rate of inflation. This would cause the debtors (people who had borrowed money) to have to pay it back at a rate that was much lower. With no central banks around a lot of bank went bankrupt and this spared the debtors from paying their debts. But due to the strong centralized bank we have set up today we wouldn’t have to worry about it.
People and businesses in the late 19th century worried and sometimes relied on an unstable economy, while in the 21st century people are free of these massive fluctuations in the economy and rely on a stable inflation rate for people to function on a day to day basis.
b) This is because a steady dollar allows more trade and business transactions to take place. Since there is a continuous change in the economy a central bank helps regulate and control the price change and inflation rate. These systems and variants being under control allow businesses to invest and treat their workers in a manner that the workers appreciate thereby reducing and kind of resistance from the working class.
I agree with Farrell because if times are stable people feel safer in all aspects be it investment in business or personal consumption.
Bp to Cd-2.2832 Cd to Bp-.4380
Cd to Jy- 84.911 Jy to Cd-1.1777
5) Real exchange rate=20000*1.5=$30,000
The American car is $4,000 less therefore it is more competitively priced.
6) Since both the values drop at similar rates compared to the dollar value their nominal exchange rate will be unaffected and the net exports will not be affected by the change.
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Inflation, Central bank, Monetary policy
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