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QUESTION 3. Keynes, when reflecting back on the Classical Gold Standard Era of 1870 – 1914,...

QUESTION 3. Keynes, when reflecting back on the Classical Gold Standard Era of 1870 – 1914, noted that one problem of the system was that many of the world’s countries failed to follow ‘the rules of the game’ whereby countries could use monetary policy to correct imbalances on the trade accounts.

A. Briefly describe how the ‘rules of the game’ would work and how it leads to a quicker and appropriate correction in the trade accounts.

B. Why did some countries fail to ‘play by the rules’ and how did they do it? C. Draw some parallels between the Japanese practice of pricing-to-market in the 1980s and the behavior of some countries under the Classical Gold Era of 1870 – 1914.

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Rahul Sunny answered 1 year ago
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