Under the gold standard
A)a perpetual surplus is possible.
B)a perpetual deficit is possible.
C)a perpetual surplus is impossible,but a perpetual deficit is possible.
D)a perpetual deficit is impossible,but a perpetual surplus is possible.
E)a perpetual surplus is impossible.

Question

Quizplus · Accepted Answer

Under the gold standard, a perpetual surplus is impossible because the amount of money circulating in the economy is limited by the amount of gold reserves held by the central bank. Therefore, there is a limited amount of money available for international transactions, making it impossible for all countries to have a surplus at the same time. A perpetual deficit is also unlikely because eventually, a country with a deficit will run out of gold reserves, leading to a devaluation of its currency and a reduction in its deficit.

Under the Gold Standard