Consider a Country That Has a Gold Standard Exchange Rate

Multiple Choice

Consider a country that has a gold standard exchange rate system. Which of the following occurs if this country expands its money supply to eliminate a surplus in its balance of payments?

A) Aggregate demand, the price level, and real GDP all decrease and eventually, net exports will rise in response to the lower price level.
B) The price level increases and real GDP increases as producers respond to the higher price level but aggregate demand will fall.
C) Aggregate demand, the price level, and real GDP all increase, and eventually, net exports will fall in response to the higher price level.
D) The price level and real GDP increase, but aggregate demand will fall.