Under the gold standard, ________ if the country's overall balance of payments remained in balance.

Question

Quizplus · Accepted Answer

Under the gold standard, a country's currency was directly convertible to gold at a fixed rate. As a result, if a country had a balance of payments surplus, meaning it exported more goods and services than it imported, it would receive payment in the form of gold from other countries. Conversely, if a country had a balance of payments deficit, meaning it imported more goods and services than it exported, it would have to pay in gold to other countries. This meant that gold would flow in and out of the country based on its balance of payments position. However, if the country's overall balance of payments remained in balance, there would be no net flow of gold, and the amount of gold reserves in the country would remain constant. Therefore, the correct answer is C, no gold would enter or leave the country.

Under the Gold Standard, ________ If the Country's Overall Balance