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  # There are fundamentally two possible changes in an economy
  
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  Senior Manager
  Joined: 19 Feb 2004
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  Location: Lungi
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  There are fundamentally two possible changes in an economy [#permalink]
  
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  07 Apr 2004, 07:40
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  There are fundamentally two possible changes in an
  economy that will each cause inflation unless other
  compensating changes also occur. There changes are
  either reductions in the supply of goods and services
  or increases in demand. In a prebanking economy
  the quantity of money available, and hence the level
  of demand, is equivalent to the quantity of gold
  available.
  
  If the statements above are true, then it is also true
  that in a prebanking economy
  (A) any inflation is the result of reductions in the
  supply of goods and services
  (B) if other factors in the economy are unchanged,
  increasing the quantity of gold available will
  (C) if there is a reduction in the quantity of gold
  available, then, other things being equal,
  inflation must result
  (D) the quantity of goods and services purchasable
  by a given amount of gold is constant
  (E) whatever changes in demand occur, there will
  be compensating changes in the supply of
  goods and services
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  Joined: 30 Oct 2003
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  Location: NewJersey USA
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  07 Apr 2004, 10:53
  B I guess. (I deleted duplicate post of lvb9th ). Increase in gold will lead to increase in the demand resulting in inflation.
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