Question

Under the classic gold standard, if prices began rising in the U.S.a.the dollar value of the pound would riseb.the dollar value of the pound would fallc.the U.S. would begin running a balance of trade surplusd.gold would flow out of the U.S. and the U.S. money supply would drop

Answer 1

In a classic gold standard system, rising prices in the U.S. would cause gold to flow out of the country, resulting in a reduction of the U.S. money supply.

Step-by-step explanation:

Under the classic gold standard, countries pegged their currencies to gold, and the international exchange rates were determined by their relative gold contents. If prices began rising in the U.S. (inflation), it implied that the value of the U.S. dollar would decrease. This would mean that goods in the U.S. would become relatively more expensive than those in other countries, leading to a decrease in exports and an increase in imports, thus creating a trade deficit.

As a consequence of the trade deficit, gold would flow out of the U.S. to settle international trade balances. This gold outflow would result in a decrease in the U.S. money supply, because the money supply was directly tied to the amount of gold held by the central bank. Therefore, the correct answer to the question is: d. gold would flow out of the U.S. and the U.S. money supply would drop.

Answer 2

The correct answer is letter "D": gold would flow out of the U.S. and the U.S. money supply would drop.

Step-by-step explanation:

The classic gold standard is an economic approach in which a nation's currency is gold. Under this approach, the money supply is kept constant and there are a few chances for inflation to arise. Hyperinflation is unlikely to exist. Under this scenario, countries producing gold would be more favored than those that do not.

In the example, in front of a rise in prices, gold would be exported from the U.S. but the countries money supply will decrease.