Question

Assume that you are one of six thousand people who live on the small island of Tap. This island is small and can only produce a maximum of six thousand bags of corn a year (ignore technological advances in corn production that are occurring elsewhere in the world). The six thousand bags of corn produced are just enough for the residents since each resident only earns enough to buy one bag of corn a year (a pity since the Tapese really love corn!). The currency on Tap is the US dollar. Now suppose that the government of Tap injects more US dollars into the economy, and the result is that person now ends up having twice the amount of US dollars as he or she did before. Make a logical prediction about prices of corn in the economy, and explain what principle of economics is illustrated in this scenario. Develop a response that includes examples and evidence to support your ideas, and which clearly communicates the required message to your audience. Organize your response in a clear and logical manner as appropriate for the genre of writing. Use well-structured sentences, audience-appropriate language, and correct conventions of standard American English. Need this essay as soon as possible please! Need this essay done please help!

Answer 1

Answer:

Response for the given topic:

In the small island of Tap, the production and the supply is fixed assuming that there are no imports.

The population is six thousand people and production is six thousand bags of corn.

Suppose that the original price of a bag of com is $1.

The money supply in the economy has increased twice as the people have twice the holding of US dollars as before.

Thus, the aggregate demand for output double at all price level.

The aggregate demand curve shifts rightwards.

The new aggregate demand curve intersects the vertical aggregate supply curve at a higher price level.

This increases the price of com twice.

This indicates the net neutrality of money as the price of money doubles with the doubling of the money supply and no impact on the output.

This is a theory of classical economics and propounded by Adam Smith.

Graph: