Question

Classical economist David Hume observed that as the money supply expanded after gold discoveries a. it took time for prices to rise; in the meantime output was higher. b. it took time for prices to rise; in the meantime output was lower. c. prices and output both increased immediately. d. prices increased immediately while output remained unchanged.

Answer 1

Answer: Option A

Explanation: As per the famous economist David Hume, the classical theory of economics does not work when it comes to short run period.

As per his opinion, there was a expansion a money supply after gold discoveries but prices climbed up after a certain time, resulting in more employment and higher production in an economy.

Thus, we can conclude that Option A is correct .