Answer the following questions about the gold standard:1)Describe what is meant by the Gold...

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Answer the following questions about the gold standard:1)Describe what is meant by the Gold Standard. 2) What were the problems with the gold standard?3) Is the dollar backed by gold today?4)Find a descriptive article (1 page or more) which deals with a current exchange rate issue. Briefly summarize the article. Include the article with the summary. [current in this case means 2013).

David · Accepted Answer

1) Describe what is meant by the Gold Standard.
In the most general terms, a gold standard means a monetary system in which a standard mass (so many grams or ounces) of pure gold defines the unit of account, and standardized pieces of gold serve as the ultimate media of redemption. Currency notes, checks, and electronic funds transfers are all denominated in gold and are redeemable claims to gold. A full gold standard implies that the monetary authority has the sufficient gold to convert all the money that it has issued into gold at a promised exchange rate. After the World War II, International Monetary Fund (IMF) came into existence and its primary objective was to reestablish the fixed exchange rates regime. In this regime gold became the international unit of account where member nations officially agreed to state the par values of their currencies in terms of gold or, alternatively, the gold content of the U.S. dollar. As a world banker, the United States assumed responsibility for buying and selling gold at a fixed price to foreign official holders of dollars. The dollar was the only currency that was made convertible into gold; other national currencies were pegged to the dollar.
What were the problems with the gold standard?
Problems with gold standard:
(i) Gold is a natural resource and hence not equally distributed across the word. Hence the gold standard is more advantageous in terms of cost and international economic empowerment for those countries that produce gold.

Answer the following questions about the gold standard:1)Describe what is meant by the Gold Standard. 2) What were the problems with the gold standard?3) Is the dollar backed by gold today?4)Find a...

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