Suppose an Economy's Exchange Rate System Is the Gold Standard

question 77

Multiple Choice

Suppose an economy's exchange rate system is the gold standard and vast tracks of gold are discovered,as is what happened in the United States in 1849.If the economy is at full employment,what should this discovery do?

• A)It should raise the money supply but have no impact on the price level.
• B)It should raise the money supply and cause inflation.
• C)It should raise the money supply and cause disinflation.
• D)It should lower the money supply and cause deflation.
• E)it should not change the money supply.

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