2 Short Essay Questions 1. Explain the Price-Specie Flow model of the Gold Standard (without and with international capital flows). 2. Explain the Rules of
2 Short Essay Questions 1. Explain the Price-Specie Flow model of the Gold Standard (without and with international capital flows). 2. Explain the Rules of the Game theory of the Gold Standard and its implications for monetary policy and economic outcomes with and without international monetary policy cooperation. 3. Using Paul Krugman's framework and drawing your own figure, explain how the existence of a credible target zone stabilizes exchange rate dynamics inside the target band when central banks are fully committed to preserving the convertibility of their currencies into gold. 4. Explain the countercyclicality of international capital flows in the pre-war Gold Standard and the procyclicality after World War I. Explain how countercyclical capital flows contributed to the stability of the system before 1913, and how procyclical flows instead contributed to instability in the 1920s. 5. Explain the tradeoff between financial sector stability and gold convertibility that many cen- tral banks faced at the beginning of the Great Depression. 6. Using an Aggregate Demand-Aggregate Supply diagram, explain the role of financial market imperfections in amplifying financial crises and making their effects more persistent
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