Which economic principle best explains why Romans were upset by the emperor's decision to create more coins?

• A. More coins in circulation make goods and services cheaper for everyone.
• B. Creating more coins automatically increases the wealth of all citizens.
• C. Increasing the money supply can lead to inflation, reducing the purchasing power of existing coins.
• D. The emperor's decision had no impact on the economy or people's wealth.

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the concept of money supply and its role in the economy. Money supply refers to the total amount of money available in an economy at a particular time, including coins, currency, and bank deposits.
2. Step 2: Recognize that when the emperor creates more coins, he is effectively increasing the money supply. This means there are more coins circulating in the economy than before.
3. Step 3: Learn the principle of inflation, which occurs when an increase in the money supply leads to a general rise in prices of goods and services. This happens because more money chases the same amount of goods.
4. Step 4: Understand that inflation reduces the purchasing power of money. Even though people have more coins, each coin is worth less, so they can buy fewer goods and services than before.
5. Step 5: Conclude that the Romans were upset because the emperor's decision to create more coins caused inflation, which diminished the value of their existing coins and effectively reduced their wealth.