When the international financial system operated under the gold standard,

Question

Quizplus · Accepted Answer

Under the gold standard, most countries' currencies were convertible into gold at a fixed price. This meant that the value of their currency was tied to the value of gold and could be exchanged for gold at any time. Therefore, choice A is the correct answer. Choices B, C, D, and E are incorrect because they are not representative of the gold standard system. All international transactions were not financed with gold, but rather with convertible currencies. The price of gold was fixed and determined by the gold standard system rather than the supply and demand for foreign exchange. The quantity of money demanded can fluctuate depending on interest rates and economic conditions, and there can be inflation under the gold standard.

When the International Financial System Operated Under the Gold Standard