ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -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.

Detailed explanation-2: -gold standard, monetary system in which the standard unit of currency is a fixed quantity of gold or is kept at the value of a fixed quantity of gold. The currency is freely convertible at home or abroad into a fixed amount of gold per unit of currency.

Detailed explanation-3: -(1) The gold standard is deflationary . In a closed economy under the gold standard, a country’s money supply is determined by its stock of gold. To increase its money supply, the government must mine more gold. ⇒ Economic growth is constrained by the gold supply .

Detailed explanation-4: -The gold standard was also an international standard determining the value of a country’s currency in terms of other countries’ currencies. Because adherents to the standard maintained a fixed price for gold, rates of exchange between currencies tied to gold were necessarily fixed.

Detailed explanation-5: -Simply put, the gold standard is a system where nations agree on a common value of a commodity, in this case, gold. Therefore, the more gold a nation had, the more valuable its currency.