Under the gold standard,the government must have enough gold to back up any
A)increase in money demand.
B)increase in the money supply.
C)change in its currency's exchange rate.
D)foreign currency deposits in its central bank.

Question

Quizplus · Accepted Answer

Under the gold standard, the amount of money in circulation was tied to the amount of gold held by the government. Therefore, any increase in the money supply would require an equivalent increase in the government's gold reserves. In contrast, an increase in money demand, a change in currency exchange rate, or foreign currency deposits may each have an impact on the economy and/or the central bank's balance sheet, but would not necessarily require an increase in the government's gold holdings.

Under the Gold Standard,the Government Must Have Enough Gold to Back