Under a gold standard,

Question

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Under a gold standard, all currencies were defined in terms of gold, meaning that the exchange rate between two currencies was fixed by their respective gold prices. This meant that the supply of a nation's money was limited to the amount of gold it held, and a deficit in the balance of payments required the outflow of gold to other countries to cover the excess imports. The gold standard also did not automatically increase a nation's money supply in response to a balance of payments deficit. Finally, interest rates did not necessarily fall in response to a deficit, but rather adjustments in the exchange rate would occur to rebalance the economy.

Under a Gold Standard