Under an international gold standard,

Question

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Under an international gold standard, gold would flow into a nation experiencing a balance of payments surplus because the surplus country would have more gold to pay for its imports, causing its currency to strengthen and other currencies to depreciate. This would lead to a balance of payments deficit in the other countries, causing gold to flow out. However, exchange rates would not necessarily fluctuate directly with domestic price levels, and nations would not necessarily agree to depreciate their currencies in proportion to GDP growth. Interest rates could have an impact on exchange rates, but not in a direct inverse relationship.

Under an International Gold Standard