According to the "rules of the game" of the gold standard era,a country's central bank agreed to react to international gold flows so as to:
A) Officially devalue a currency during eras of payments surpluses
B) Officially revalue a currency during eras of payments deficits
C) Offset the automatic-adjustment mechanism (e.g.,prices)
D) Reinforce the automatic-adjustment mechanism

Question

Quizplus · Accepted Answer

The gold standard era operated on the basis of an automatic-adjustment mechanism where international gold flows would cause changes in prices and exchange rates to correct for imbalances in trade. The central bank's role was to reinforce this mechanism by ensuring an adequate supply of gold reserves to meet demand and prevent severe fluctuations in exchange rates. Therefore, the central bank's actions would aim to reinforce the automatic-adjustment mechanism rather than offset it. Choice A and B are incorrect as official devaluation and revaluation would disrupt the automatic-adjustment mechanism.

According to the "Rules of the Game" of the Gold