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Advantages and disadvantages of gold standard

Write the advantages and disadvantages of the gold standard.

E

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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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