Effect on gold consumption also mining of an increased

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Reference no: EM1321945

Q. Assume the consumption of gold offers people a marginal utility that diminishes as that person consumes more gold. Assume also that gold can be mined in unlimited amounts at the constant marginal cost, , units of the non-gold consumption good.

a. Can the trading value of gold exceed in equilibrium? Explain. Illustrate what is the effect on gold consumption also mining of an increased utilized of gold as money?

b. Assume instead that the marginal mining cost increases with the amount mined. Illustrate what is now the effect on gold consumption also mining of an increased utilize of gold as money?

Reference no: EM1321945

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