Explain the automatic mechanism by which BOP equilibrium was achieved under the gold standard.
7 views
0 votes
0 votes
Explain the automatic mechanism by which BOP equilibrium was achieved under the gold standard.
User Avatar
by
12.8k points

1 Answer

0 votes
0 votes
 
Best Answer
Gold was used as a single unit of measurement for other countries' currencies under the gold standard system. As a result, a currency's worth was determined in terms of gold. In an open market, the exchange rate was set by its gold value. It was set in lower and upper bounds, within which it was free to fluctuate. As a result of the gold standard, the exchange rate became steady. To exchange currency, all governments retain a gold stock. The price-specie-flow mechanism proposed by David Hume is the adjustment process under the gold standard. A balance of payment imbalance will be repaired by a gold counter-flow under the gold standard. An automatic equilibrating method was used to maintain the fixed exchange rate.
User Avatar
by
12.8k points

Related questions

1 answer
0 votes
0 votes
11 views
1 answer
0 votes
0 votes
4 views
Deepak kumar Asked Dec 20, 2022
7 views
Deepak kumar Asked Dec 20, 2022
by Deepak kumar
18.0k points
1 answer
0 votes
0 votes
7 views
1 answer
0 votes
0 votes
6 views
S. Ruby Asked Feb 20, 2023
5 views
S. Ruby Asked Feb 20, 2023
by S. Ruby
7.8k points
1 answer
0 votes
0 votes
5 views
S. Ruby Asked Feb 19, 2023
9 views
S. Ruby Asked Feb 19, 2023
by S. Ruby
7.8k points
1 answer
0 votes
0 votes
9 views
WELCOME TO ANSWER AVENUE, WHERE YOU CAN ASK QUESTIONS AND RECEIVE ANSWERS FROM OTHER MEMBERS OF THE COMMUNITY.

Categories