Suppose a country’s currency is a gold coin. One day, speculators find a large g

Question

Suppose a country’s currency is a gold coin. One day, speculators find a large gold mine which doubles the supply of gold coins in the economy. In the short run:

A.)both output and price levels will rise; in the long run the price level stays elevated, but output goes back to its long-run level.

B.) Only price levels will rise in the long run the price level is unchanged, but output goes back to its long-run level.

C.)neither output nor price levels will rise; in the long run the price level falls, but output goes back to its long-run level.

D.) Only output will rise, in the long run the price level is unchanged, but output goes back to its long-run level.

Explanation / Answer

Only output will rise, in the long run the price level is unchanged, but output goes back to its long- run level

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