Final answer:
The gold standard created stability and trust in currency through gold backing, enforcing fiscal discipline and preventing competitive devaluations, which could potentially address trade imbalances.
Step-by-step explanation:
The gold standard historically provided a number of advantages to the world monetary system. As countries backed their currencies with gold, this standard created a sense of stability and trust in currency value. For example, at the time of the Bretton Woods conference, there was widespread confidence in the US dollar due to America's significant gold reserves and the assurance that dollars could be exchanged for gold at a fixed rate. This system also limited competitive devaluations among countries and thus promoted stable exchange rates, which can be important for international trade and investment.
Return to a gold standard could help address trade imbalances by enforcing fiscal discipline, as it restricts the ability of countries to print money without gold backing. It could also provide a stable environment for international trade by minimizing the risk of competitive devaluations. However, while the gold standard could theoretically mitigate trade imbalances, there are numerous challenges and potential disadvantages in practice, such as reduced monetary policy flexibility and the fixed supply of gold limiting economic growth.