Multiple Choice
Which of the following are two measures countries can employ to restrict foreign direct investment (FDI)?
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7. Externalities
Externalities: Social Benefits and Social Costs
Multiple Choice
Which effect did the increase in the Mali gold supply by Mansa Musa have on gold prices?
A
It caused gold prices to remain stable despite the increased supply.
B
It caused gold prices to decrease due to an increase in supply.
C
It had no significant effect on gold prices.
D
It caused gold prices to increase due to higher demand.
Verified step by step guidance1
Step 1: Understand the basic economic principle of supply and demand, which states that if the supply of a good increases while demand remains constant, the price of that good tends to decrease.
Step 2: Identify that Mansa Musa's increase in the gold supply means there was a significant increase in the quantity of gold available in the market.
Step 3: Recognize that with more gold available (higher supply) and assuming demand for gold did not increase proportionally, the market would experience a surplus of gold at the original price.
Step 4: Apply the law of supply and demand, which predicts that this surplus would put downward pressure on gold prices, causing them to decrease.
Step 5: Conclude that the increase in gold supply by Mansa Musa led to a decrease in gold prices, as the supply increase outpaced demand.
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