How did the gold standard contribute to the spreading of the Great Depression of the 1930s?
What will be an ideal response?
After World War I most of the major industrialized countries of the world successfully reconstructed the gold standard. The United States and France were running large current account surpluses (trade surpluses) which saw gold flowing into the vaults of these two countries. Instead of allowing their domestic money supplies to increase, fearing inflation, the monetary authorities in both countries tightened the money supply. The results were severe since it caused the authorities in countries experiencing current account deficits (trade deficits) and gold outflows to have to tighten their monetary policies even more. The quantity of money worldwide was decreasing and the price level had to decrease as well. The resulting deflation increased the likelihood that people would default on loans and tightened credit availability, destroying the economic and financial systems in many countries including the United States.
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The table above shows the total product schedule for The X Firm. The average product of labor is maximized at ________ workers because ________
A) 4; productivity is maximized when the 4th worker is employed B) 3; output starts to decrease with the 4th worker C) 5; output is maximized with the 5th worker D) 4; the marginal product of labor is increasing with the 4th worker E) 5; the APL exceeds the MPL for the 5th worker
If the financial innovations such as ATM machines make money demand less elastic than it was before, then
a. the LM curve will become steeper. b. the LM curve will become flatter. c. both the IS and LM curves will become flatter. d. the LM curve will shift to the left.
Barter was more feasible in primitive societies than in modern societies because: a. there was no inflation in primitive societies
b. there were many goods available for trade in primitive societies, so people could always find the goods that they wanted. c. specialization was limited and thus there were few goods available for trade in primitive societies. d. specialization was limited and thus there were many goods available for trade in primitive societies. e. people in primitive societies had limited wants.
Which of the following could be a cause of consumption decreasing?
A. Real income increases. B. Interest rates increase. C. Wealth increases. D. Expected future income increases.