If a currency rapidly depreciates, what are the possible negative ...

[D2AR0N]

If a currency rapidly depreciates, what are the possible negative results to the economy of using contractionary monetary policy to address the depreciation?
 
  What will be an ideal response?

Question 2

Using the specific factors model, assume that strawberry production requires the specific factor of land, tractor production requires the specific factor of capital, and labor is variable. If the United States is capital abundant compared to Mexico, and Mexico is land abundant compared to the United States, then in the short run with trade, which of the following is true?
 
  A) Mexican wages will rise more than the increase in the price of tractors in Mexico.
  B) U.S. wages will rise less than the fall in the price of tractors in the United States.
  C) The owners of capital in the United States will see a larger increase in their incomes in percentage terms than the increase in the price of tractors.
  D) The owners of land in Mexico will see a smaller increase in their incomes in percentage terms than the increase in the price of strawberries.

[orangecrush]

Answer to Question 1

National income falls and perhaps the economy goes into a recession.

Answer to Question 2

C