Under the Gold Standard, When a Nation Had a Deficit

question 2

Multiple Choice

Under the gold standard, when a nation had a deficit in its balance of payments

• A) interest rates would rise which would reduce foreign investment.
• B) interest rates would fall which would increase foreign investment.
• C) gold would flow to foreign residents and the domestic money supply would decrease.
• D) gold would flow into the country leading to an increase in the domestic money supply.

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Definitions:

Tires

Rubber coverings placed around wheels to provide traction, support the vehicle's load, and absorb shocks from the road surface.

Absolute Advantage

A condition where a country, individual, or company can produce a good or service at a lower cost in terms of labor and resources than competitors.

Comparative Advantage

An economic theory stating that in order to gain from trade, countries should specialize in producing goods for which they have a lower opportunity cost.

Computers

Electronic devices capable of processing, storing, and retrieving data, widely used for work, education, and entertainment.