Fin 370 Question and Answer Assignment 2 with Full Solutions

the rules of the game (classic gold standard) - under the gold standard, a country's money supply was limited to the amount of gold held by its central bank; each country set the rate at which its currency unit (paper or coin) could be converted to a given weight of gold (fixed exchange rate) defending a fixed exchange rate - under the gold standard, a country was responsible for preserving the exchange value of the country's currency by being willing and able to exchange its currency for gold reserves upon the demand of a foreign central bank interwar years and WWII - currencies were allowed to fluctuate over farily wide ranges in terms of gold and in relation to each other; theoretically, supply and demand for a country's exports caused moderate changes in an exchange rate about a central equilibrium value; unfortunately, such flexible rates did not work in an equilibriating manner