If the U.S.were to revert to a gold standard, trade deficits would:

Question

Quizplus · Accepted Answer

If the US were to revert to a gold standard, trade deficits would result in higher domestic interest rates because in order to maintain the gold standard, a trade deficit would mean that more gold would be leaving the country than coming in, which would decrease the money supply. To counteract the decrease in money supply, interest rates would have to go up to encourage foreign investors to bring their gold to the US.

If the USWere to Revert to a Gold Standard, Trade Deficits Would