Asked by Rebecca Lovato on Jun 19, 2024
Verified
Statement I: The gold standard will not work well when the world's gold supply does not increase as quickly as the world's need for money.
Statement II: The years the world used the gold standard were the closest the world has ever come to having an international currency.
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.
Gold Supply
The total amount of gold available in the market, including mined gold, recycled gold, and central bank gold reserves.
Gold Standard
A monetary system where a country's currency has a value directly linked to gold, allowing it to be freely converted into fixed amounts of gold.
International Currency
A currency that is used for international trade and investment, accepted across national borders.
- Comprehend the significance and logic of international currencies and the gold standard system.
Verified Answer
PC
Paolo CastilloJun 22, 2024
Final Answer :
C
Explanation :
Statement I is true because the gold standard relies on gold reserves to back currency value, and if gold supply doesn't increase with economic growth, it can lead to deflation and economic stagnation. Statement II is true because during the period the gold standard was in use, it provided a uniform measure of value across different countries, facilitating international trade and investment, making it the closest thing to an international currency.
Learning Objectives
- Comprehend the significance and logic of international currencies and the gold standard system.