Answer to Question #40454 in Macroeconomics for susan

Question

What is a gold standard?

Answer 1

What is a gold standard?
Solution
Gold standard is a monetary system in which the value of banknotes and coins denominated in a certain guaranteed amount of gold.
As a reference, gold was used because it has a number of qualities: it is sufficiently rare metal, which does not deteriorate during storage, it is possible to identify the quality , as well as easy to share in the desired proportions.
The basis of the gold standard is the obligation to exchange the issuing banknotes or coins for gold on demand. This eliminates the inflation component of financial market: paper money can not be produced in unlimited quantities and because of that lose value.