The ________________ served as the automatic adjustment mechanism under the gold standard exchange system.
A)mint parity
B)gold import point
C)price-specie-flow mechanism
D)purchasing power parity model

Question

Quizplus · Accepted Answer

The price-specie-flow mechanism was the automatic adjustment mechanism under the gold standard exchange system. This mechanism stated that a country experiencing a trade surplus (exporting more than importing) would receive gold inflows, which would increase its money supply and lead to higher prices. In contrast, a country experiencing a trade deficit (importing more than exporting) would face gold outflows, which would decrease its money supply and lead to lower prices. These price changes would make the country's goods and services more or less competitive, thus leading to a correction of the trade imbalance.

The ________________ Served as the Automatic Adjustment Mechanism Under the Gold