ECONOMICS
MONETARY POLICY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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paper currency issued by the Treasury that was redeemable in both gold and silver
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mechanism designed to keep the money supply portable, durable, divisible, and limited in supply
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monetary standard under which the basic currency unit is equivalent to, and can be exchanged for, a specific amount of gold
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fiat currency that must be accepted in payment for debts
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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: -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-3: -Bimetallism, also known as the bimetallic standard, is a monetary standard in which the value of the monetary unit is defined as equivalent to certain quantities of two metals, typically gold and silver, creating a fixed rate of exchange between them.
Detailed explanation-4: -A fixed exchange rate (also known as the gold standard) quantifies the values of currencies by using a stable reference point. Historically, gold has been used as the reference point. This is because it is a valuable commodity worldwide and its value is less susceptible to fluctuations in interest rates.
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.