Make the argument, pro's and con's, for returning to the gold standard. List the positive and negative effects of reversing the current policy. E.g., How might this affect international trade? Our trade balance? Our currencies value vis a vis other currencies? Why did the US abandon the standard in the first place?
Fully identify the factors that such a change would affect.© BrainMass Inc. brainmass.com October 9, 2019, 4:17 pm ad1c9bdddf
Make the argument, pro's and con's, for returning to the gold standard.
The major benefit of a gold standard is that price stability. Due to the slow process of mining gold, the money supply expands slowly. As a result, inflation is mild. It also places a constraint on the ability of government to engage in inflationary finance. They cannot spend recklessly because they cannot devalue the debt by printing more money. (They re-define the currency to inflate prices).
The adverse effects include a slow growing money supply that leads to deflation. Some argue that deflation, like inflation, has severe negative effects. Deflation harms debtors by raising the value of their debt. The gold standard also limits the ability of governments to engage in ...
List factors that such a change would affect.