If gold is being used for money, an increase in the supply of gold will cause
A)a decrease in the money supply.
B)the price of all other goods to fall.
C)the price of gold to increase.
D)an increase in the price of all other goods.
E)nothing to happen to inflation.

Question

Quizplus · Accepted Answer

When gold is used as money, an increase in the supply of gold would lead to more money being in circulation. This, in turn, would decrease the value of each unit of money, leading to higher prices for goods and services, or inflation. This is because the increased supply of gold (money) would reduce its purchasing power, requiring more gold to purchase the same amount of goods or services.

If Gold Is Being Used for Money, an Increase in the Supply