Suppose that international trade is the only kind of international transaction between the United States and Canada. The United States currently is experiencing a balance of trade deficit with Canada. What would happen to the United States and Canadian money supplies if the United States and Canada both used the gold standard?
A) The U.S. money supply would rise and the Canadian money supply would fall.
B) Both the U.S. and Canadian money supplies would rise.
C) The U.S. money supply would fall and the Canadian money supply would rise.
D) Both the U.S. and the Canadian money supplies would fall.
Ans: C) The U.S. money supply would fall and the Canadian money supply would rise.
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