Under a pure gold standard

Question

Quizplus · Accepted Answer

Under a pure gold standard, all currencies are defined in terms of gold and these rates are fixed. The value of the currency is directly tied to the amount of gold held by the issuing government. This system eliminates the need for foreign exchange markets as all currencies are convertible to gold at a fixed rate. However, this system can be rigid and limit the ability of governments to adjust monetary policy in response to economic conditions.

Under a Pure Gold Standard