Asked by Feryal Rushdan on Jul 30, 2024
Verified
Under an international gold standard,
A) a nation sacrifices an independent monetary policy.
B) gold flows between nations would always promote macroeconomic stability.
C) exchange rates would fluctuate with changes in demand and supply.
D) balance of payments imbalances would be magnified.
Independent Monetary Policy
This is a policy framework where a country's central bank has the autonomy to implement monetary policies, such as setting interest rates, without direct interference from the government, to achieve macroeconomic stability.
International Gold Standard
A monetary system in which countries tie the value of their currencies to a specific amount of gold, facilitating stable exchange rates and international trade.
Balance of Payments
A log detailing all financial interactions between a country's inhabitants and other global entities over a specific timeframe.
- Understand the chronological progression and the functions of worldwide exchange rate mechanisms, including the gold standard and the Bretton Woods system.
- Attain an understanding of the gold standard's fundamental principles, considering its significance in international monetary policy and balance of payments recalibrations.
Verified Answer
CC
Caroline CapaprisAug 05, 2024
Final Answer :
A
Explanation :
Under an international gold standard, countries fix their currencies to a specific amount of gold, which limits their ability to independently adjust their monetary policy to respond to domestic economic conditions. This is because the supply of money is directly tied to the country's gold reserves.
Learning Objectives
- Understand the chronological progression and the functions of worldwide exchange rate mechanisms, including the gold standard and the Bretton Woods system.
- Attain an understanding of the gold standard's fundamental principles, considering its significance in international monetary policy and balance of payments recalibrations.