5. Gold standard Between 1879 and 1914, 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 France defined a French franc as 120 grains of gold, and the United States defined $1 as 100 grains of gold. Under the gold standard, a French franc would have been worth, U.S. dollars. Suppose the fixed exchange rate is $1.20 per franc. Suppose that an economic expansion in the United States leads to an increase in imports from France. PRICE OF A FRANC (In Dollars) imbalance. 12 06 24 Supply for francs Demand for francs Supply for francs + Demand for francs The Imbalance 12 16 QUANTITY OF FRANCS (Millions) An economic expansion in the United States leads to an increase in imports from France. As a result, the demand for French francs causing a million imbalance in the U.S. balance of payments. Under the gold standard, how is the fixed exchange rate maintained in the face of the balance-of-payments imbalance shown on the previous graph? Gold must flow from France to the United States. Gold must flow from the United States to France. The IMF must lend dollars to France with which to buy francs. The IMF must lend francs to the United States with which to buy dollars