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Solved: What happens to the price and the quantity bought and sold in the cocoa market

Principles of Economics | 2nd Edition | ISBN: 9781947172364 | Authors: Steven A. Greenlaw, David Shapiro, Timothy Taylor ISBN: 9781947172364 471

Solution for problem 33 Chapter 4

Principles of Economics | 2nd Edition

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Principles of Economics | 2nd Edition | ISBN: 9781947172364 | Authors: Steven A. Greenlaw, David Shapiro, Timothy Taylor

Principles of Economics | 2nd Edition

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4
Problem 33

What happens to the price and the quantity bought and sold in the cocoa market if countries producing cocoa experience a drought and a new study is released demonstrating the health benefits of cocoa? Illustrate your answer with a demand and supply graph.

Step-by-Step Solution:
Step 1 of 3

• M-2 adds time depositsBanks create money by fractional reserve banking Fiscal policy: tax compared to spending • Decided politically and managed by the Treasury Monetary policy • Management of the money supply and interest rates using interest rates and open market • Managed by the Federal Reserve Both policies are currently highly expansionary Treasury bonds • Fixed dollar sum (fixed income security) • Prices up => rates down • Prices down => rates up o Bond goes to $101 – yield is 1.96/101 = 1.94% o Bond goes to $99 – yield is 1.96/99 = 1.98% • Inverse relation Defined benefit pension less risky than defined contribution for employee Change asset mix as you age Gradually sell stocks and buy bonds Choose low fee fundsDon’t cash out when you move job

Step 2 of 3

Chapter 4, Problem 33 is Solved
Step 3 of 3

Textbook: Principles of Economics
Edition: 2
Author: Steven A. Greenlaw, David Shapiro, Timothy Taylor
ISBN: 9781947172364

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Solved: What happens to the price and the quantity bought and sold in the cocoa market