According to Hume's Specie Flow Mechanism,during the Gold Standard,if the domestic inflation rises sharply,the domestic country will experience ___________ and the foreign trading partner will experience __________.
A) trade deficit; higher prices.
B) trade deficit; lower prices.
C) trade surplus; higher prices.
D) trade surplus; lower prices.

Question

Quizplus · Accepted Answer

According to Hume's Specie Flow Mechanism, during the Gold Standard, if the domestic inflation rises sharply, the domestic country will experience a trade deficit as its goods become more expensive relative to foreign goods. This will lead to an outflow of gold from the domestic country to the foreign trading partner, which will experience a trade surplus and higher prices as its currency appreciates in value.

According to Hume's Specie Flow Mechanism,during the Gold Standard,if the Domestic