In the United States, how has the gold standard affected the occurrence of inflation and deflation?
A) Deflation was more common with the gold standard, and inflation is more common with fiat money.
B) Deflation is more common with fiat currency, and inflation was more common with the gold standard.
C) Inflation and deflation seem to occur equally with both the gold standard and fiat money.
D) There has been no consistent relationship between how often inflation and deflation occur and whether the U.S. uses fiat currency or the gold standard.

Question

Quizplus · Accepted Answer

Deflation was indeed more common when the U.S. was on the gold standard because the supply of gold limited the expansion of money, which can lead to deflation. In contrast, with fiat money, which is not backed by a physical commodity, it is easier for central banks to increase the money supply, leading to more common occurrences of inflation.

In the United States, How Has the Gold Standard Affected