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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 8 months ago
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