Under the gold standard, if a country imported more than it exported, the
A) deficit had to be covered with its inventory of gold.
B) deficit was balanced with a surplus in its capital account.
C) deficit was balanced by increasing the money supply.
D) trade deficit would have to be balanced with a fiscal budget surplus.

Question

Quizplus · Accepted Answer

Under the gold standard, a country's trade deficit had to be covered by its inventory of gold. If a country imported more goods than it exported, it had to pay for the difference in gold. Therefore, a trade deficit would lead to a decrease in the country's gold reserves, which would lead to a decrease in its money supply.

Under the Gold Standard, If a Country Imported More Than