Price Revolution

Definition

The Price Revolution refers to a period of significant inflation that occurred in Europe during the 16th century, primarily driven by an influx of precious metals from the New World and other economic changes. This surge in prices affected various aspects of society, including social structures, agriculture, and commerce, leading to profound economic impacts, especially for Spain and Portugal as they were at the forefront of these changes.

5 Must Know Facts For Your Next Test

1. The Price Revolution primarily resulted from the influx of silver and gold from Spanish colonies in the Americas, particularly from mines like Potosí.
2. Inflation rates during this period varied significantly, with prices rising approximately 300% in Spain between 1500 and 1600.
3. While the price rise benefitted landowners who could increase rents, it negatively impacted peasants and urban workers whose wages did not keep pace with rising costs.
4. The Price Revolution contributed to a shift in economic power, fostering greater centralization of authority in Spain and Portugal as they sought to manage inflation and control their economies.
5. In addition to economic consequences, the Price Revolution had social implications, leading to increased tension between different social classes and contributing to unrest in urban areas.

Review Questions

• How did the influx of precious metals from the New World contribute to the inflation experienced during the Price Revolution?
  • The influx of precious metals, particularly silver from Spanish colonies, significantly increased the money supply in Europe. As more silver entered circulation, it diminished the value of currency, leading to inflation. This price rise affected all aspects of life, including wages and purchasing power, as prices for goods surged while wages remained relatively stagnant for many workers.
• Discuss the impact of the Price Revolution on social structures in Spain and Portugal during this period.
  • The Price Revolution led to significant changes in social structures within Spain and Portugal. Landowners were able to increase rents due to rising prices, which allowed them to accumulate more wealth and power. In contrast, peasants and urban laborers faced hardships as their wages failed to keep up with inflation. This growing economic disparity contributed to social unrest and tensions among different classes, ultimately reshaping societal dynamics.
• Evaluate how the Price Revolution influenced economic policies in Spain and Portugal during the 16th century and its long-term effects on their global trade relationships.
  • The Price Revolution forced Spain and Portugal to reevaluate their economic policies as they struggled with inflation and its repercussions. Both countries adopted mercantilist strategies aimed at maximizing wealth through trade while managing inflationary pressures. This shift had long-term effects on their global trade relationships by encouraging colonial expansion for resources while also fostering economic dependencies with other nations. Ultimately, this laid the groundwork for future economic systems that prioritized resource extraction over sustainable development.

Related terms

Inflation: A general increase in prices and fall in the purchasing value of money, often caused by an increase in the supply of money.

Mercantilism: An economic theory prevalent in the 16th to 18th centuries that emphasized the importance of accumulating wealth through trade and maintaining a favorable balance of trade.

Silver Trade: The extensive trade network established during the 16th century, where silver mined in the Americas was exchanged for goods in Europe, Asia, and Africa.