Asked by Andreas Frånlund on Jun 19, 2024
Verified
Statement I: A de facto dollar standard exists in many parts of the world.
Statement II: Adherence to the gold standard would render monetary policy utterly ineffective.
A) Statement I is true and statement II is false.
B) Statement II is true and statement I is false.
C) Both statements are true.
D) Both statements are false.
De Facto Dollar Standard
An international financial system in which the U.S. dollar is used as the primary reserve currency by other countries, even though it may not be officially designated.
Monetary Policy
Control of the rate of monetary growth by the Board of Governors of the Federal Reserve.
- Detail the historical shift from using the gold standard to the present-day method of currency trading.
- Identify the impact of fiscal policies on global commerce and currency valuations.
Verified Answer
AK
Abiraj KanagaratnamJun 21, 2024
Final Answer :
C
Explanation :
Statement I is true because the US dollar is widely used as a reserve currency and for international transactions, creating a de facto dollar standard. Statement II is true because under a gold standard, the money supply is tied to the amount of gold a country possesses, limiting the government's ability to use monetary policy to influence the economy.
Learning Objectives
- Detail the historical shift from using the gold standard to the present-day method of currency trading.
- Identify the impact of fiscal policies on global commerce and currency valuations.