Praxis II Citizenship

Answer: B - During the 16th century, Spain literally mined tons of silver in the New World, but the riches ultimately contributed to staggering inflation that wounded the Spanish economy. At the height of Spain’s New World silver extraction, they were acquiring 300 tons of silver a year. It seems counterintuitive that such a valuable commodity would have an equally terrible impact on a country’s prosperity, but that’s exactly what happened in Spain. Historians now believe that there were multiple contributing factors to Spain’s economic woes, but in the very least, the influx of silver was a leading cause. The silver was coined after arriving in Spain then released into circulation, which caused the money supply to increase dramatically. The increased money supply caused inflation (an increase in prices for goods and services). Mines naturally yielded less silver as time went on. As a result, less currency entered the marketplace while the inflated prices remained the same or continued to rise, making the cost of living unaffordable.