Question

Under a gold standard, A. countries should keep the supply of their domestic money constant. B....

Under a gold standard,
A. countries should keep the supply of their domestic money constant.

B. the production of gold greatly influences countries’ monetary policy.

C. countries should keep the supply of foreign exchange less than their domestic money supply.

D. countries should restrict the demand for foreign goods. E. most countries’ currencies were convertible directly into gold at fixed rates, but exchange rates between currencies were not fixed.

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Answer #1

The correct option is: E. most countries’ currencies were convertible directly into gold at fixed rates, but exchange rates between currencies were not fixed.

The gold standard is a monetary system where a country's currency or paper money has a value directly linked to gold. With the gold standard, countries agreed to convert paper money into a fixed amount of gold. A country that uses the gold standard sets a fixed price for gold and buys and sells gold at that price. That fixed price is used to determine the value of the currency.

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