USA HISTORY

Detailed explanation-1: -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-2: -Under the Gold Standard, a country’s money supply was linked to gold. The necessity of being able to convert fiat money into gold on demand strictly limited the amount of fiat money in circulation to a multiple of the central banks’ gold reserves.

Detailed explanation-3: -The gold standard prevents inflation as governments and banks are unable to manipulate the money supply (e.g., overissuing money). The gold standard also stabilizes prices and foreign exchange rates.

Detailed explanation-4: -Under gold standard, every member country fixes the value of its currency in terms of certain weight of gold given purity. Moreover, there is an undertaking given by each country’s monetary authority to purchase or sell gold in unlimited quantity at the officially fixed price.