In David Hume's price-specie-flow doctrine or adjustment mechanism, the assumption is made that changes in the money supply have an impact on __________. Further, the demand for traded goods is assumed to be __________ with respect to price.
A) prices rather than on output; elastic
B) prices rather than on output; inelastic
C) output rather than on prices; elastic
D) output rather than on prices; inelastic

Question

Quizplus · Accepted Answer

According to Hume's price-specie-flow doctrine, changes in the money supply have an impact on prices rather than on output. The demand for traded goods is assumed to be elastic with respect to price, meaning that changes in price will have a significant impact on demand. Therefore, option A is the most appropriate choice as it reflects both assumptions of Hume's doctrine.

In David Hume's Price-Specie-Flow Doctrine or Adjustment Mechanism, the Assumption