--%>

Equilibrium of balance of payments

State mechanism that restores equilibrium of balance of payments in case it gets disturbed below the gold standard.

E

Expert

Verified

Adjustment mechanism under gold standard is known as price-specie-flow mechanism expounded by the David Hume. Under gold standard, disequilibrium of balance of payment will get corrected by counter-flow of gold. Assume that U.S. imports in large amount from the U.K. as compared to the latter. Under the classical gold standard, gold, that is the only mode of international payments, will flow from the U.S. to the U.K. Consequently, the U.S. (U.K.) may have a decrease (increase) in supply of money. Which state that the price level may tend to fall in U.S. and increase in the U.K. Consequently, U.S. products may become more competitive in the export market, on the other hand products of the U.K. becomes less competitive. This modification might improve the U.S. balance of payments and simultaneously hurt the U.K. balance of payments, finally removing the initial BOP disequilibrium.

   Related Questions in Financial Accounting

  • Q : Abnormal profits Atypically large

      Atypically large proceeds made by an individual or company from commercial activity. An abnormal profit exceeds the normal chance for profit derived from labor costs and capital and considered normal profit. Abnormal profit in a business resides of monopoly and consortium profits.

  • Q : Calculate the PV You expect the price

    You expect the price of the stock 3 years from now to be $119.04 (i.e., you expect P ˆ   3  ?? = $119.04). Discounted at a 10% rate, what is the present value of this expected future stock price? In other words, calculate the PV of $119.04.&nb

  • Q : Discrimination to women and minority

    Most of the organizations have established policies to remedy discrimination whenever hiring women and minorities. Discuss whether you feel that affirmative action programs, reverse discrimination, and criteria of comparable worth are suitable forms of remedy. You mus

  • Q : Hedging transaction exposure and money

    Compare and discuss the hedging transaction exposure by using the forward contract vs. money market instruments. When the optional hedging approaches do creates the same result?

  • Q : Article on Valuation of assets Write an

    Write an article on Valuation of assets serves for both buyers and sellers of goods and services.

  • Q : What is Casting What is Casting in

    What is Casting in Accounting. What is its significance?

  • Q : Calculation of NPV Calculation of NPV:

    Calculation of NPV: Calculation of NPV is done through the same method of discounting as described above. However in this case the rate is predefined for  discounting. It is the cost of overall long term resources, whether debt or equity. This co

  • Q : Define Revenue Revenue : The amount

    Revenue: The amount (sum) of money which a company really receives throughout a specific period, comprising discounts and deductions for the returned merchandise. This is the "top line" or "annual income" figure from which costs are subtracted to find

  • Q : Hedgers and Speculators Explain hedgers

    Explain hedgers and speculators are two types of economic agents required for a derivatives market to function.

  • Q : Portfolio of Sharemarket SHAREMARKET

     SHAREMARKET ASSIGNMENT SHEET  - Select a share portfolio consisting of one company from each group listed above. The total value of your portfolio should add up to