Question

In: Economics

When did the U.S. go off of the Gold Standard? Explain the Trilemma.

When did the U.S. go off of the Gold Standard?

Explain the Trilemma.

Solutions

Expert Solution

1.  

  • A monetary system in which value of currency is based on gold is known as gold standard or we can say that the value of currency is directly linked to gold.
  • U.S stopped using gold standard in 1933 and disused its remains in 1973 when this standard was replaced by fiat money.
  • The gold standard was abandoned to tackle the great depression when government was facing increasing unemployment and spiraling deflation.

2.

  • Trilemma is an economic theory supposed to be helpful in economic decision making.
  • Accroding to this theory while making basic choice regarding the international monetary policy agreements a country has three options.
  • However only two out of three options are available simultaneously to a country at a given time.
  • In other words, a country can't pursue all the three policies at the same time.
  • The three options are: Having a fixed foreign exchange rate, allowing capital to flow freely and have autonomous monetary policy

Rahul Sunny answered 7 months ago
Next > < Previous

Related Solutions

Why did the U.S. return to the gold standard in 1875?
Why did the U.S. return to the gold standard in 1875?
What is the classical gold standard (1821-1914)? How did the classical gold standard work in practice?...
What is the classical gold standard (1821-1914)? How did the classical gold standard work in practice? When and how did it collapse?
#2.  Explain the gold standard and why the U.S. stopped using it.   Your answer must a) identify...
#2.  Explain the gold standard and why the U.S. stopped using it.   Your answer must a) identify at least one advantage and disadvantage to the gold standard, b) talk about convertibility of dollars to gold, and c) identify at least one key event and year of a change relating to the use of the gold standard. HINTS: There were several events that weakened how the gold standard was used before It was totally abandoned. Other hints: Bretton Woods and foreign exchange)
Question 2: International Monetary System a. Why did the world not go back to the Gold...
Question 2: International Monetary System a. Why did the world not go back to the Gold Standard at the end of World War 2? b. Why did the world not adopt floating exchange rates at the end of World War 2? c. What was the Bretton Woods Exchange Rate System abandoned by the major economies in March 1973?
Why did the gold standard collapse? Is there a case for returning to some type of...
Why did the gold standard collapse? Is there a case for returning to some type of gold standard? What is it?
What was the purpose of abandoning the gold standard? Would it make sense for the U.S....
What was the purpose of abandoning the gold standard? Would it make sense for the U.S. to return to the gold standard? What would be the benefit? Identify two possible problems with a gold standard and explain why those problems are created by a gold standard. Explain how shocks can spread among countries under an international gold standard.
What was the purpose of abandoning the gold standard? Would it make sense for the U.S....
What was the purpose of abandoning the gold standard? Would it make sense for the U.S. to return to the gold standard? What would be the benefit? Identify two possible problems with a gold standard and explain why those problems are created by a gold standard. Explain how shocks can spread among countries under an international gold standard.
Explain the nature of the macroeconomic `trilemma.’ Why is the trilemma inescapable, and how have countries...
Explain the nature of the macroeconomic `trilemma.’ Why is the trilemma inescapable, and how have countries tended to deal with it over time?
Explain the open economy policy trilemma.
Explain the open economy policy trilemma.
Why was the gold standard developed? What problems did it appear to solve and what problems...
Why was the gold standard developed? What problems did it appear to solve and what problems did it create? What is the difference between the gold standard and the gold exchange standard?
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT