Final answer:
The gold standard was maintained from 1880 to 1914 by allowing interest rates to fluctuate according to the flow of gold, with economic powers using monetary policy to manage their gold reserves and currency values.
Step-by-step explanation:
From 1880 to 1914, the gold standard was principally maintained as the major economic powers, namely the United Kingdom, the United States, and France, allowed interest rates to fluctuate in response to the flow of gold. This provided a mechanism to balance the inflow and outflow of gold and maintain the value of their currencies.
The governments' ability to use monetary policy to influence the economy through setting domestic interest rates was crucial in maintaining the gold standard. The usage of fiscal policy was also a part of this strategy, as it would impact both the amount of currency in circulation and government spending which could affect gold reserves directly.
The gold standard established a connection between currency and a fixed quantity of gold, giving foreign investors and nationals alike confidence in the value of the money printed by a government. Conflicts over this system arose due to regional discrepancies in the distribution of gold reserves and the interest of various economic sectors in having the currency backed by silver.
The system also placed constraints on the money supply, which directly tied the national currency's value to the finite reserves of gold held by that nation's government.
Exchange rates during the era of the gold standard were fixed, as each currency was pegged to a specific amount of gold, a practice that was later abandoned in favor of floating exchange rates.