Question

15.How the exchange rates were determined under the gold standard?

Answer 1

When two trading countries are both on the gold standard, their currencies can be converted into gold at a fixed rate.

The exchange rate between two such currencies will not depart much from the mint par, and will move between the two points of export and import of gold. These points are also called “Gold Points”.

These points are discovered by adding or subtracting the cost of transporting gold from the mint par.

If the rate of exchange goes beyond these points, gold will either be imported or exported. The mint par of exchange is discovered by comparing the real gold contents of the two currencies. Such a system does not exist anywhere now.