Advantages and disadvantages of gold standard
Write the advantages and disadvantages of the gold standard.
Expert
Advantages of the gold standard involves:
a) As supply of gold is controlled, countries do not have high inflation;
b) Any of BOP disequilibrium may be corrected through the cross-border flows of the gold.
While, the major disadvantages of gold standard are as:
a) The world economy may be subjected to the deflationary pressure due to restricted gold supply;
b) The standard of gold itself does not have any mechanism for enforcing rules of game, and, consequently, countries can pursue economic policies which are incompatible with standard of gold.
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