If,under the gold standard,the United States was importing more from Britain than it was exporting to Britain,price levels in the United States and Britain would,respectively
A) rise and rise.
B) remain unchanged and rise.
C) remain unchanged and fall.
D) fall and rise.
E) rise and fall.

Question

Quizplus · Accepted Answer

Under the gold standard, the balance of trade between countries would affect the flow of gold. In this scenario, the United States is importing more from Britain than it is exporting, which means that it is paying more to Britain than it is receiving. As a result, gold would flow out of the United States and into Britain, causing a contraction of the US money supply and an expansion of the British money supply. This would lead to falling price levels in the United States and rising price levels in Britain. Therefore, the correct answer is D) fall and rise.

If,under the Gold Standard,the United States Was Importing More from Britain