The gold standard was adopted in response to which of the following historical developments?

• A. The Great Depression
• B. The collapse of the Bretton Woods system
• C. Increasing international trade and the need for stable exchange rates
• D. The discovery of large silver reserves

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the context of the gold standard. The gold standard is a monetary system where a country's currency value is directly linked to gold, providing a fixed exchange rate mechanism.
2. Step 2: Identify the historical period when the gold standard was widely adopted, which was primarily in the late 19th and early 20th centuries, before the Great Depression and the Bretton Woods system.
3. Step 3: Recognize the economic conditions that motivated countries to adopt the gold standard, focusing on the need for stable exchange rates to facilitate increasing international trade.
4. Step 4: Compare the options given: The Great Depression and the collapse of Bretton Woods occurred after the gold standard was already in place, so they are not the reasons for its adoption.
5. Step 5: Conclude that the correct historical development prompting the adoption of the gold standard was the increase in international trade and the consequent need for stable exchange rates.