Study resources on Kenyaplex

Get ready-made curriculum aligned revision materials

Exam papers, notes, holiday assignments and topical questions – all aligned to the Kenyan curriculum.

Or go directly to:

Class notes Holiday assignments Topical questions Other resources

Why is gold standard not an answer to payment mechanism?

Answers

1. It is costly and the cost is unnecessary (maintaining, transportation, environment cost of digging for gold).
2. Under the gold standard currency can not be expanded in response to increase in trade.
3. The supply of currency depends on the supply of gold but the supply of gold depends on the success of the mining which may have nothing to do with factors affecting the growth of trade and industry.
4. Gold movement leads to changes in interest rate which affects investments and thus affecting the money income.
5. A country on gold standards can not follow an independent policy. In order to maintain the gold standards or restore, it may have to deflate its currency against its will.

Wilfykil answered the question on March 8, 2019 at 10:11

Answer Attachments

Next: List some of the reasons against international trade

Previous: Why did the gold standards fail?

View more Money and Banking Questions and Answers | Return to Questions Index

Get ready-made curriculum aligned revision materials

Why is gold standard not an answer to payment mechanism?

Answers

Exams With Marking Schemes

Related Questions