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7. Gold standard Between 1879 and 1934, the world's major nations adhered to the gold standard. Under the gold standard, a country maintained a fixed
7. Gold standard Between 1879 and 1934, 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 Germany defined a German mark as 120 grains of gold, and the United States defined $1 as 100 grains of gold. Under the gold standard, a German mark would have been worth _ U.S. dollars. Suppose the fixed exchange rate is $1.20 per mark. Suppose that a recession in the United States leads to a reduction in imports from Germany. On the following graph, shift the relevant curve or curves to illustrate the described changes. Then use the black points (plus symbol) to indicate the imbalance. 2.4 O 2.1 Supply of Marks Demand for Marks 1.8 1.5 Supply of Marks PRICE OF A MARK (In Dollars) 1.2 + 0.9 The Imbalance 0.6 Demand for Marks 0.3 O 2 6 8 10 12 14 16 QUANTITY OF MARKS (Millions) Activate Windows Go to Settings to activate WindoHomework: The International Monetary System: Order or Disorder? On the following graph, shift the relevant curve or curves to illustrate the described changes. Then use the black points (plus symbol) to indicate the imbalance. (?) 2.4 O 2.1 Supply of Marks Demand for Marks 1.2 1.5 Supply of Marks 1.2 PRICE OF A MARK (In Dollars) The Imbalance 0. 0.6 Demand for Marks 0.3 6 8 10 12 14 16 QUANTITY OF MARKS (Millions) A recession in the United States leads to a reduction in imports from Germany the demand for German marks and leading to a million marks in the balance-of-payments. Under the gold standard, the fixed exchange rate is maintained in the face of the balance-of-payments imbalance shown on the preceding graph because gold must flow from to
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