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Describe the basic principles of a Gold Standard system of exchange rates. To what extent did the Bretton-Wood system of exchange rates improve on the original Gold Standard?
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Describe the basic principles of a Gold Standard system of exchange rates. To what extent did the Bretton-Wood system of exchange rates improve on the original Gold Standard? The first international monetary system in modern times was the gold standard. The gold standard provided for the free circulation between nations of gold coins of standard value at a fixed rate. These exchange rates were fixed and fluctuated only within very limits dependent on the cost of shipping gold. Under the gold standard, the balance of international payments was maintained by price levels adjusting in individual countries. The Gold standard during 1870-1914 worked very well with very few devaluation of currencies, whereas in 1914-mid 1920's most of the country return to floating exchange rates. In 1930 there was a major trade imbalances, which lead to adoption of widespread protectionism and deflationary policies. Competitive devaluation and the abandonment of the Gold Exchange standard. The...
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