Analyze the effects of the federal government's monetary policies such as tariffs and the gold standard, on the following groups: (a) farmers; (b) businesses and banks.
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How did tariffs and the gold standards affect (a) farmers and (b) businesses and banks.
http://www.life123.com/parenting/education/american-history/farmers-gold-standard.shtml
http://future.state.gov/when/timeline/1921_timeline/smoot_tariff.html
http://economics.about.com/cs/taxpolicy/a/tariffs.htm
http://useconomy.about.com/od/monetarypolicy/p/gold_standard.htm
To analyze the effects of the federal government's monetary policies such as tariffs and the gold standard on farmers, businesses, and banks, we need to understand how these policies work and their potential impact on these groups.
1. Tariffs: Tariffs are taxes or duties imposed on imported goods. They are used to protect domestic industries, promote local manufacturing, and reduce competition from foreign markets. Here's how they affect the different groups:
- Farmers: Tariffs can benefit farmers by reducing competition from imported agricultural products. This protection can potentially increase demand and prices for domestically produced goods. However, if other countries retaliate with their tariffs on agricultural goods, it may lead to decreased exports for farmers and overall market instability.
- Businesses: Tariffs can have mixed effects on businesses. Domestic industries that face foreign competition might benefit from tariffs as they face reduced competition and may see an increase in demand for their products. However, businesses that rely on imported raw materials or intermediary goods might face increased costs, which could affect their profitability and competitiveness.
- Banks: Tariffs can indirectly impact banks through their effects on businesses and the overall economy. If businesses face increased costs due to tariffs, they may reduce their investment or scale back their operations, potentially leading to reduced borrowing or default risks for banks.
2. Gold Standard: The gold standard is a monetary system where the value of a country's currency is directly linked to the value of gold. It restricts the government's ability to create money and provides stability to the currency. Here's how it affects the different groups:
- Farmers: Under the gold standard, the value of the currency remains relatively stable, reducing the risk of inflation. This stability can benefit farmers as they can predict prices for their agricultural products and plan their production and investment accordingly.
- Businesses: The gold standard is generally associated with stable prices, which provides a favorable business environment. Stable prices allow businesses to make more accurate financial planning, calculate costs, and set prices. This stability fosters economic growth and investment.
- Banks: The gold standard constrains the ability of banks and the government to create money freely. Banks' ability to expand credit or lend money is limited to the availability of gold reserves. This can potentially affect banks' ability to stimulate economic growth through lending during times of economic downturn or financial crisis.
It is important to note that the effects of these policies can vary depending on various factors, such as the specific implementation, economic conditions, and global trade dynamics. Detailed analysis requires examining specific historical cases and considering the broader economic context.