Between 1879 and 1934, the world\'s major nations adhered to the gold standard.
ID: 1222309 • Letter: B
Question
Between 1879 and 1934, the world's major nations adhered to the gold standard. Under the gold standard, a country maintained a fixed relationship between its stock of gold and its money supply. Suppose that Great Britain defined a British pound as 90 grains of gold, and the United States defined $1 as 150 grains of gold 2 2 Under the gold standard, a British pound would have been worth 0.50 US. dollars Suppose the fixed exchange rate is $0.60 per pound. Suppose that a recession in the United States leads to a reduction in imports from Great Britain On the following graph, shift the relevant curve or curves to illustrate the described changes. Then use the black points (cross symbol) to indicate the imbalance Demand for pounds 0.9 Supply of pounds 0.6 The Imbalance 0.3 Demand for pounds 12 16 QUANTITY OF POUNDS (Millions)Explanation / Answer
1. 0.60
Demand curve will shift to the left or Downward and not the supply curve to the right as shown in graph.
Decreasing
1 Million (draw nre demand curve such that it cuts suppy curve at price = 0.6)
Decrease
Gold flow from Great Britain to the United States
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