0. A country that uses the gold standard sets a fixed price for gold and buys and sells gold at that price. If nations can only print as much money as they can back with gold, there could be a shortage of money. A gold standard means the value of a country’s currency is linked to a specified amount of gold. Answer: The advantages of the gold standard include: (I) since the supply of gold is restricted, countries cannot have high inflation; (2) any BOP disequilibrium can be corrected automatically through cross-border flows of gold. Many Indians think investing in gold is an excellent investment and provides protection in a financial emergency. This happened to ancient Rome also. " One disadvantage of the gold standard is that there is a limited supply of gold.   Under the gold standard, the government can only print as much money as its country has in gold. DISADVANTAGE OF GOLD STANDARD – 1 Offer. The Gold Standard “The gold standard is a monetary system where a country's currency or paper money has a value directly linked to gold. The gold standard is the simple idea that every unit of currency is backed by a corresponding amount of gold. The Gold Standard’s History. Gold-Standard? Question 2. a) Discuss the advantages and disadvantages of gold standard. This restriction is an essential check on government power.   Proponents of a gold standard say it provides a self-regulating and stabilizing effect on the economy. ADVANTAGES AND DISADVANTAGES OF GOLD STANDARD, Discuss the advantages and disadvantages of gold standard., IBO-06: INTERNATIONAL BUSINESS FINANCE, IGNOU, IGNOU ASSIGNMENTS, currency, M.COM YEAR 1, IBO-06 SOLVED ASSIGNMENT 2017-18, GUFFO SOLVED ASSIGNMENT 2017-18 The benefit of a gold standard is that a fixed asset backs the money's value. The gold standard has roots in ancient history: Gold was used to fund trade and finance wars. This would result in stoppage of gold production which had an adverse effect on international liquidity. This stifles economies, since people buy and sell less. Countries with persistent trade deficit suffered from recessions resulting in reduced investments and unemployment. Disadvantages of the Gold Standard. When this actually happens, over time money increases only in proportion with the amount of gold that is mined. 4. Since leaving the gold standard in 1971 US currency in circulation (M1) increased from $48.6 billion to over $5.2 trillion in June 2020. For the present population there is not enough gold to serve as a gold standard. The gold standard prevents the debasement of money for political purposes and stabilizes business cycles. A gold standard leads to deflation whenever an economy using the gold standard grows faster than the gold supply. Discuss the advantages and disadvantages of the gold standard. Greetings, Gold is not used just to make jewellery and ornaments. History shows that shortages of money lead to hoarding. Under the gold standard, governments needed to be ready and willing to buy and sell gold to anyone at the set price. it is also considered a popular form of investment in India. Deflation rewards cash savings and punishes debtors. Under a gold standard, new money could only be printed if a corresponding amount of gold were available to back the currency. Analysis of the Videofluoroscopic and Fiberoptic Endoscopic Swallow Examinations . Author CA Dipesh Aggarwal Posted on Posted on February 12, 2018 March 27, 2019. DISADVANTAGES OF GOLD STANDARD The cost of manufacturing gold gradually increased to levels beyond the official prices. Real debt burdens therefore rise, causing borrowers to cut spending to service their debts or to default. ADVANTAGES AND DISADVANTAGES OF GOLD STANDARD. With the gold standard, countries agreed to convert paper money into a fixed amount of gold. That undermines the financial system. 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