Question

Advantage and disadvantage of gold standard

Answer 1

The advantages of the gold standard are that (1) it limits the power of governments or banks to cause price inflation by excessive issue of paper currency, although there is evidence that even before World War I monetary authorities did not contract the supply of money when the country incurred a gold outflow, and (2) it creates certainty in international trade by providing a fixed pattern of exchange rates.

The disadvantages are that (1) it may not provide sufficient flexibility in the supply of money, because the supply of newly mined gold is not closely related to the growing needs of the world economy for a commensurate supply of money, (2) a country may not be able to isolate its economy from depression or inflation in the rest of the world, and (3) the process of adjustment for a country with a payments deficit can be long and painful whenever an increase in unemployment or a decline in the rate of economic expansion occurs.

Answer 2

advantage of gold standerd are

1. it was easy system to introduce and operate.
2. it provided a fully secured system for settlement of international transection.
3. it provided a very high level of stability.

disadvantages of gold standerd are

1.the cost of manufacturing gold gradually increased to level byond the official.
2. countries with persistent trade deficit suffered from reasons resulting in reduced investment and implement.