The calculation of each currency's par value under the gold standard was based on the concept of ________.

Question

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The par value of a currency under the gold standard was based on purchasing power parity, which is the concept that the exchange rate between two currencies should equal the ratio of the two countries' price levels. This means that the value of a currency was determined by the price of gold relative to other prices in the economy. The other options, such as earnings per share, interbank interest rates, and inflation rates, were not factors in determining a currency's par value under the gold standard.

The Calculation of Each Currency's Par Value Under the Gold