In the 14th century, the Western African Emperor Kankan Musa travelled to Cairo where he gave away much gold, which was in use as a medium of exchange. How would we predict this increase in gold would do to the price level and value of gold in Cairo?

Question

Quizplus · Accepted Answer

Giving away much gold would increase the supply of gold in Cairo, which would decrease the value of gold. However, since gold was also in use as a medium of exchange, the increase in supply would lead to an increase in demand for goods and services, ultimately raising the price level. Therefore, the answer is option B, which predicts that the increase in gold would raise the price level but decrease the value of gold in Cairo.

In the 14th Century, the Western African Emperor Kankan Musa