The international financial market moved towards equilibrium under the gold standard due to

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Under the gold standard, the value of a country's currency was directly linked to the amount of gold it held. As a result, flows of gold among countries played a crucial role in bringing about equilibrium in the international financial market. If a country had a trade deficit, it would have to pay for its imports with gold, causing its gold reserves to diminish. This would lead to a decrease in the money supply and domestic prices, making its exports cheaper and imports more expensive. As a result, demand for its goods would increase, ultimately rebalancing its trade. Conversely, a country with a trade surplus would receive gold, increasing its money supply and domestic prices, and making its exports more expensive and imports cheaper. This decrease in demand would rebalance its trade as well. Thus, the flows of gold among countries played a crucial role in bringing about equilibrium in the international financial market during the gold standard era.

The International Financial Market Moved Towards Equilibrium Under the Gold