On the gold standard,a trade deficit in the U.S.impacted the economy by producing

Question

Quizplus · Accepted Answer

Under the gold standard, a trade deficit would require the U.S. to export gold to pay for the imported goods. This would lead to a tight supply of money, as the amount of gold in circulation decreased. This in turn would lead to higher interest rates and deflation. Therefore, the correct choice is B, as it directly correlates with the impact of trade deficits under the gold standard. A is incorrect because a gain of specie would only occur if the U.S. had a trade surplus. C is incorrect because low interest rates would not be a likely outcome of a trade deficit under the gold standard. D is only partially correct, as deflation would be a likely outcome of a trade deficit, but the tight supply of money caused by the outflow of gold is a more direct result.

On the Gold Standard,a Trade Deficit in the U