Under the classic gold standard,if prices began rising in the U.S.
A)the dollar value of the pound would rise
B)the dollar value of the pound would fall
C)the U.S.would begin running a balance of trade surplus
D)gold would flow out of the U.S.and the U.S.money supply would drop

Question

Quizplus · Accepted Answer

Under the classic gold standard, the value of a currency was tied to a fixed quantity of gold. If prices began rising in the U.S., demand for U.S. goods would fall, leading to a decrease in demand for the dollar. Investors and traders would start selling dollars and buying gold. This would cause gold to flow out of the U.S. to other countries, which would lead to a decrease in the U.S. money supply. As a result, the value of the dollar would fall, and prices would eventually stabilize.

Under the Classic Gold Standard,if Prices Began Rising in the U.S