Suppose that currently in the United States, the price of gold increased at the same time that the general level of prices was rising. Under these circumstances, the value of U.S. money would:

Question

Quizplus · Accepted Answer

When the general level of prices rises, it indicates inflation, which decreases the purchasing power of money. The increase in the price of gold alone does not necessarily affect the value of money directly; it's the inflation (rise in general price levels) that leads to the decrease in the value of money.

Suppose That Currently in the United States, the Price of Gold