Chapter 10.3, Problem 1QS3

Summary Introduction

To Determine:

The type of international monetary system having gold standard as an example.

Introduction:

When country’s currency or paper money’s value is directly linked to gold is referred as the gold standard in a monetary system. Paper currency are agreed to be converted into fixed amount of gold. Fixed prices of gold are set by the country that uses the gold standard and sell the gold at that price. Hence, the value of the currency is determined by the fixed price.