Under a gold standard,if the market price of gold is above the official price of gold (set by the monetary authority),people will be more likely to sell gold __________________,which will cause the money supply to _______________ and the price level.to _______________.
A) to the monetary authority; fall; fall
B) to the monetary authority; rise; rise
C) in the gold market; fall; fall
D) in the gold market; rise; rise

Question

Quizplus · Accepted Answer

If the market price of gold is above the official price set by the monetary authority, people would want to sell gold in the gold market where they can get the higher price. This increased supply of gold in the market would lead to a fall in the price of gold. As the gold standard links the value of money to gold, a fall in the price of gold would reduce the value of money and cause the price level to fall. Therefore, the correct answer is C.

Under a Gold Standard,if the Market Price of Gold Is