Question

In the fourteenth century, the Western African Emperor Kankan Musa traveled to Cairo where he gave away much gold, which was in use as a medium of exchange. We would predict that this increase in gold:______.a. raised both the price level and the value of gold in Cairo. b. raised the price level, but decreased the value of gold in Cairo. c. lowered the price level, but increased the value of gold in Cairo. d. lowered both the price level and the value of gold in Cairo.

Answer 1

b. raised the price level, but decreased the value of gold in Cairo

Step-by-step explanation:

In this case, its most likely that inflation would occur because there was a sudden influx of gold into the market thereby reducing the price level of goods because there will be an increase in demand, which if it exceeds supply will increase price. This would further reduce the value of gold in the market because of the unexpected arrival in the market.