If currencies around the world are based on the gold standard,and the EU lowers the amount of gold for which the euro will trade,then holding all else constant,
A)the euro will depreciate against the dollar.
B)the euro will appreciate against the dollar.
C)the value of the euro relative to the dollar will stay constant.
D)U.S.exports to EU countries will increase.

Question

Quizplus · Accepted Answer

If the EU lowers the amount of gold for which the euro will trade, the value of the euro will decrease. This means that it will take more euros to buy the same amount of goods as before. As a result, the euro will depreciate against the dollar, as it will take fewer dollars to buy the same amount of goods in euros.

If Currencies Around the World Are Based on the Gold