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3. As king of Medivalia, you are constantly strapped for funds to pay your army. Your chief economic wizard suggests the following plan: When you
3. As king of Medivalia, you are constantly strapped for funds to pay your army. Your chief economic wizard suggests the following plan: "When you collect your tax payments from your subjects, insist on being paid in gold coins. Take those gold coins, melt them down, and remint them with an extra 10 percent of brass thrown in. You will then have 10 percent more money than you started with." What do you think of the plan? Will it work? 4. Why is M2 sometimes a more stable measure of money than M1? Explain in your own words using the definitions of ( mathrm{M} 1 ) and ( mathrm{M} 2 ). 5. After suffering two years of staggering hyperinflation, the African nation of Zimbabwe officially abandoned its currency, the Zimbabwean dollar, in April 2009 and made the U.S. dollar its official currency. Why would anyone in Zimbabwe be willing to accept U.S. dollars in exchange for goods and srvices?
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