The Gold Standard quiz #1 Flashcards
The Gold Standard quiz #1
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Which activity occurred under the gold standard monetary system? Under the gold standard, currency holders could exchange their paper money for a specific amount of gold from the government. The gold standard was adopted in response to the need for what in international trade and monetary policy? The gold standard was adopted to provide stability and predictability in international trade by linking currency values to gold, ensuring fixed exchange rates between countries. Which country was the first to adopt the gold standard, and in what year did this occur? The United Kingdom was the first to adopt the gold standard in 1816. How were exchange rates determined under the gold standard system? Exchange rates were determined by the amount of gold backing each country's currency, making rates fixed based on gold equivalence. Why did the gold standard restrict a government's ability to conduct monetary policy? Because the money supply was tied to gold reserves, governments could not easily increase the money supply or adjust interest rates. What happened to countries that remained on the gold standard longer during the Great Depression? Countries that stayed on the gold standard longer experienced more prolonged and severe economic hardships during the Great Depression. By what year had most countries in Europe and the Western Hemisphere adopted the gold standard? By 1913, most countries in Europe and the Western Hemisphere had adopted the gold standard. What is one major reason why the gold standard has not been reinstated since its abandonment? A major reason is its lack of flexibility in controlling the money supply, which limits effective monetary policy. Under the gold standard, what would you receive if you exchanged a British pound at a bank? You would receive one ounce of gold for each British pound exchanged at a bank. What replaced the gold standard as the basis for determining exchange rates between currencies? Exchange rates are now determined by the supply and demand of currencies rather than being fixed by gold reserves.