Question

1. how does a gold standard work? what is a country required to do as the levels of their gold reserves rise and fall?

2. what is the Internalization theory as applied to Foreign Direct Investment?

3. Explain the GATT and the WTO. what is the difference between the two?

4. what are the four major components of the Porter Dynamic Diamond (determinants of national competitive advantage)? Explain each of them.

Answer 1

how does a gold standard work? what is a country required to do as the levels of their gold reserves rise and fall?

The world gold council is a non-profit association of the world's leading gold producers.the gold standard is a monetary system in which paper money is freely convertible in to fix amount of gold. The gold standard is a monetary system where countries'currency or paper money has a value directly linked to gold.with the gold standard countries agreed to convert paper money into a fix amount of gold.

gold was used as the World reserve currency up through most of the 20th century. The US used the gold standard until 1971. The paper money had to be backup by equal amount of gold in their reserves.although the gold standard has been discontinued some economist feel that we should return to eat due to the volatility of the US dollar and other currencies.the demand for gold increase during inflation time due to its inherent value and limited supply. As it cannot be diluted, gold is able to retain value much better than other forms of currency.

when a country imports more than its export the value of its currency will decline.on the other hand the value of its currency will increase when a country is a net exporter. Thus country that export gold or has access to gold reserves will see an increase in the strength of its currency when gold price increases since the increase the value of the country's total exports.