Question

The Gold Standard 1870-1914 was associated with which of the following?

		globalization
		London at the center of the system
		pure commodity currency
		all of the above

Which of the following elements of Glass-Steagal act of 1934 was designed to prevent bank runs?

		FDIC
		separation between investment banking and the National treasury
		interest rate ceilings
		FOMC

Nationalist protectionist policies had which impact on the Great Depression?

		shortened the depression and preserved employment domestically
		shortened the depression and increased inequality domestically
		prolonged the depression significantly
		these policies were benign with respect to the Great Depression

Like many stable monetary regimes the Gold Standard broke down because of which of the following?

		excessive money printing to finance war
		excessive government budget deficits
		loss of faith in the intrinsic value of gold
		technological innovation disrupting the old system

Answer 1

1. Option D

European countries wanted to standardize transactions in the booming world trade market, so they adopted the gold standard.Britain dominated the international begins and London became the centre of Gold Standard system.

The gold standard is a monetary system where a country's currency or paper money has a value directly linked to gold. With the gold standard, countries agreed to convert paper money into a fixed amount of gold. A country that uses the gold standard sets a fixed price for gold and buys and sells gold at that price. That fixed price is used to determine the value of the currency.Commodity money is a commodity that has intrinsic value. Intrinsic value means that the commodity has value even if it is not used as money.

2.Option A

To prevent bank runs and the consequent bank failures, the United States established the FDIC in 1934 to provide deposit , the U.S.insurance.Additionally Congress established the Federal Deposit Insurance Corporation (FDIC) in 1933. Created in response to the many bank failures that happened in the preceding years, this agency insures bank deposits. The Glass-Steagall Act effectively separated commercial banking from investment banking and created the Federal Deposit Insurance Corporation.

3.Option C

The Smoot-Hawley Act increased tariffs on foreign imports to the U.S. by about 20%. At least 25 countries responded by increasing their own tariffs on American goods. Global trade plummeted, contributing to the ill effects of Great Depression.

4.Option C

One problem with a gold standard is that the size and health of a country's economy are dependent upon its supply of gold. The economy is not reliant on the resourcefulness of its people and businesses. Countries without any gold are at a competitive disadvantage.A fixed money supply, dependent on gold reserves, would limit economic growth. Many businesses would not get funded because of a lack of capital.