1. Suppose that the United States and Canada both use a gold standard, so that each unit of currency is backed by a fixed amount of gold.This means, in practical terms, thatwheneversomeonegoestothebankoragovernmentexchangewindow,thatthey can demand gold in exchange for their cash.

Brieflyexplainhowthiswouldaffecteachofthefollowingsituations.(5% each)

1. TheexchangeratebetweenCanadaandtheUnitedStates(i.e.howmanyCanadian dollars can be exchanged for an American dollar).
2. InflationintheUnitedStatesoverthelong-term.
3. Long-termbusinessplanninginCanada.
4. SavingdecisionsintheUnitedStates.