Im kinda of confused about this history stuff.help?

Question

1.The free coinage of silver would increase or decrease the amount of money in circulation?

2. INcreasing the amount of money in circulation causes deflation or inflation?

3. Debtors or Creditors would be more likely to favor inflation?

4. A protective tariff on manufactured goods would cause the prices of those goods to go lower or higher?

Answer 1

1.If you can coin silver, then it must add to the money in circulation.

2. Prices rise to fit the amount of money.  If you had a society with 100 identical goods and $100 each good would cost $1.  If you doubled the money to $200, each good would cost $2.  So increasing money increases inflation because it increases the average price level.

3. A debtor, not paying in silver but in dollars, who owes $1000 in 1890 could buy one house.  If you increase the amount of silver so that it took $1200 to buy one house, then in terms of real goods, the creditor, when repaid in 1891 can no longer use the $1000 to buy a house.  So the creditor is worse off and the debtor, who for our purposes bought the house, can now sell it for a $200 profit, repay the creditor and at no time used their own money.  Debtors of fixed rate debt love inflation.

4. A protective tariff, to work, must tax the incoming competing goods.  Lets say Americans could sell something for $1.1 and the English could sell it for a $1, but America puts a 20 cent protective tariff on it.  Then Americans could sell all their goods up to $1.19 and only after they are sold out could the English begin selling their goods at $1.20.  So tariffs reduce competition and increase prices.

Answer 2

1 increase

2 inflation

3 debtors

4 higher