gold standard presentation new
TRANSCRIPT
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Gold Standard
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Objectives
Meaning and definition
Domestic gold standards
International gold standards
Merits
Demerits
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Meaning and definition
The gold standard is when the value ofa
country's money is tied to the amount of
gold the country possesses.Anyoneholdingthat country's paper money could
present it to the government and receive an
agreed upon value (par value)from
that country's gold reserves.
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DOMESTIC GOLDSTANDARD
When a country adopts gold standard two
important functions must be performed:
Should regulate the volume ofcurrency in thecountry.
It should maintain thestability offoreign
exchange rate.
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INTERNATIONAL GOLDSTANDARD
Medium ofexchange and standard ofvalue.
When the value ofmonetary units ofdifferent
countries arefixed in terms ofspecific weightofgold.
Prices between different countries are closely
related to gold movement.
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Advantages
Long-term pricestability can be described.
limits the power ofgovernments to inflate
prices throughexcessive issuance ofpapercurrency
fixed international exchange rates and
reduces uncertainty in international trade.
prevents governmentsfrom 'inflating away'
the real value oftheir debts
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Disadvantages
Size and health ofa country's
economy is dependent upon itssupply of
gold. Obsessed with keeping their gold.
Largefluctuations in theeconomy.
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gold specie standard-system in which the
monetary unit is associated with circulating
gold coins, or with the unit ofvalue defined interms ofone particular circulating gold coin in
conjunction withsubsidiary coinage made
from a lesser valuable metal.
Types ofgold standard
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gold exchange standard- the circulation of
only coins made ofsilver or other metals, but
where t
he aut
horities guarantee a fixedexchange rate with another country that is on
the gold standard.This creates a de facto gold
standard the value ofthesilver coinshas a
fixed external value in terms ofgold that isindependent ofthe inherent silver value
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gold bullion standard- is a system in which
gold coins do not circulate, but in which the
auth
oritiesh
ave agreed to sell gold bullion ondemand at a fixed price in exchangefor the
circulating currency.
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Rate of exchange under gold
standard Mint par system - the value ofone currency is
determined in terms ofother by equating the
gold content or gold equivalent ofeach
currency i.e. the number ofunits ofone
currency whichshould legally contain the
same amount ofpure metal as does (legally)
a given number ofunits ofanother currency.
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Species points- the points at which country
finds it cheaper and advantageous to import
or export gold instead ofbuying and sellingbills, draftsetc to settle international debts.
When the country thus resort to importation
ofgold, it is gold import point and when a
country exports gold it is gold export point.