Assume that a country is on the gold standard. In order to support unrestricted convertibility into gold, banknotes need to be backed by a gold reserve of some minimum stated ratio. In addition,

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Under the gold standard, the domestic money stock should indeed rise and fall as gold flows in and out of the country to maintain the fixed exchange rate and convertibility into gold. The central bank's control over the money supply is limited under this system, as it is primarily determined by gold flows rather than foreign currency transactions.

Assume That a Country Is on the Gold Standard