The United States and most other countries abandoned the gold standard during the 1930s. Why would the 1930s have been a particularly difficult time for countries to have remained on the goldstandard?

(Hint: Think about the macroeconomic events of the 1930s and about the possible problems with carrying out an expansionary monetary policy while remaining on the gold standard.)

A.

The size of acountry's money supply was determined by the amount of gold available. To rapidly expand its money supply during adepression, a country would need either to increase gold production fast or to abandon the gold standard.

B.

Under the goldstandard, the money supply is tied to the amount of gold. Increasing production of gold was deemed dangerous for the value of money.

C.

TheSmoot-Hawley Tariff, enacted following the stock market crash during thedepression, set off a trade war that reduced netexports, thereby making the gold exchange among countries difficult. The monetary policy based on the gold standard was not functioning efficiently.

D.

The economic depression demanded an expansionary monetary policy. Because of the rigid banking system at thetime, it was difficult to lower interest rates.