If currencies around the world are based on the gold standard and the European Union lowers the amount of gold for which the euro will trade, then holding all else constant,

Question

Quizplus · Accepted Answer

If the amount of gold for which the euro will trade decreases, it means the euro is worth less. Therefore, it will take more euros to buy the same amount of gold as before. This makes the euro less attractive to investors, causing the demand for the currency to decrease, and the value of the euro to decrease relative to currencies such as the Canadian dollar.

If Currencies Around the World Are Based on the Gold