Whatever Happened To Penny Candy Ch 3
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Questions and Answers

What happens to the value of money when the supply of money increases?

  • The value of money increases.
  • The value of money stays the same.
  • The value of money decreases. (correct)
  • The value of money fluctuates wildly.
  • How did the debasement of the denarius primarily affect its value?

  • It caused the denarius to become almost worthless. (correct)
  • It made each denarius more valuable.
  • It caused inflation to decrease.
  • The debasement had no impact on the denarius.
  • What is inflation primarily defined as in the content provided?

  • An increase in the amount of money. (correct)
  • A decrease in money supply.
  • A rise in the value of commodities.
  • An increase in the supply of goods.
  • Why did prices of goods rise in the Roman Empire according to the content?

    <p>Because the value of the denarius went down.</p> Signup and view all the answers

    What major comparison is made concerning inflation in both ancient Rome and modern times?

    <p>Governments are creating excessive amounts of money.</p> Signup and view all the answers

    What key point is made about inflation and rising prices?

    <p>Certain prices can rise even without inflation.</p> Signup and view all the answers

    What was the price of a bushel of wheat in 100 A.D.?

    <p>3 denarii.</p> Signup and view all the answers

    In 2003, how much was the amount of dollars in circulation in the United States?

    <p>$1.3 trillion.</p> Signup and view all the answers

    What does the law of supply and demand state regarding an increase in supply?

    <p>Prices will fall.</p> Signup and view all the answers

    What does the content suggest is a common misconception about inflation?

    <p>Inflation is synonymous with rising prices.</p> Signup and view all the answers

    Study Notes

    Inflation Explained

    • Inflation is an increase in the amount of money in circulation, causing the value of each unit of currency to decrease, and prices to rise.
    • The law of supply and demand applies to money: more money = lower value per unit.
    • The Roman Empire experienced high inflation due to excessive coinage, leading to a dramatic drop in the denarius' value. A bushel of wheat that cost 3 denarii in 100 AD, cost 2 million in 344 AD.
    • Modern economies, including the US, also experience inflation. For example, prices of goods rose as the amount of US dollars increased, from roughly 200 billion in 1968 to 1.3 trillion in 2003.
    • Inflation is not the same as rising prices—inflation causes rising prices, whereas other factors may also contribute to price increases.
    • Inflation, besides higher prices, has other consequences, which will be covered later.

    Effects of Inflation

    • When the money supply increases, the value of each individual unit of money decreases.
    • This results in rising prices for goods and services.
    • People need more of the devalued currency to buy the same amount of goods.
    • The value of the currency (like the denarius or modern dollar) is what decreases during inflationary periods, not the value of goods being purchased.

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    Description

    This quiz explores the concept of inflation, its causes, and its impact on modern economies. You'll learn how an increase in the money supply can lead to rising prices and how historical examples, like the Roman Empire, illustrate these principles. Test your knowledge of inflation's consequences and its relation to supply and demand.

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