In discussing the situation of countries leaving the gold? standard, or? \"unila

Question

In discussing the situation of countries leaving the gold? standard, or? "unilaterally devaluing" during the? 1930s, Barry Eichengreen of the University of California at Berkeley and Jeffrey Sachs of Columbia University? argued: ?"In all cases of unilateral? devaluation, currency depreciation increases output and employment in the devaluing? country." Source?: Barry Eichengreen and Jeffrey? Sachs, "Exchange Rates and Economics? Recovery," Journal of Economic History?, Vol.? 45, No.? 4, December? 1985, p. 934. How would leaving the gold standard in the 1930s lead to an increase in a? country's output and? employment ?Check all the options that apply there can be more than one answer.

A. The country was free to pursue expansionary fiscal policy.

B. The? country's central bank would not have to take actions to remain on the gold standard that contracted production and? employment, such as raising interest rates.

C. The country was free to pursue expansionary monetary policy.

D. The? country's central bank would not have to take actions to remain on the gold standard that contracted production and? employment, such as lowering interest rates.

Explanation / Answer

Correct Answer:

B

C

Leaving the gold standard, helped the country to move away from the fixed exchange rates among the other benefits. It caused the central bank to implement expansionary monetary policy without inhibition so that economic growth and employment take place in the economy.

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