18 Taternational Financial Managemen standard. It should be noted, howev Siautrency into gold and of gold into currency this mechanism of gole Standard eannat function effectively to maintain ‘xchange stabilit @ 4. Write short notes on the followin, { Rules of the gold standard game. AD Draw backs of the International Gold standard, Ans. _ Rules of the Gold Standacd Game js Successful working of the automatie international go Standard presupposes that there is no conacinns management of th sintard but that participating countries adhere (2 What is called tie ates of the gold standard game, These rules seca follows; J There must be free import and export of gold between the Participating countries, 2 The governments concormed must observe this golden rule « Sold standard, viz., expand eredit when gold coming in, contrac Srefit when gold is going out. Thus, the peldereeny make arrangements for currene Bold-losing country for currency and credit contraction, 3, artic petld Bea high dogrecof flexibility inthe price aystom ithe participating countries, so that whes the mon etary pressure o £0ld movement is exerted priee levels roe or not accompanied by ‘er, that without free convertibilis ing country mus Smooth adjustments of costs, 4. There should be absence of dist; ‘the automatic operation of the gold et, ributings capital movement, fandard can be ensured oni coontcion eine things, the investment poliey ste lending varnages "eméins uniform, Fights of eapital ape independent of the destroying (the Tespestive rates of interest andl oe capable of destroying the whole gold standard mechaaien 5. Although free trade is it an essential condition ofa successful funetioning ofthe gold standard, the gaine rencha that thore shoul be no savere réstrictions on intornational trava tg ticul ‘wotas hinder theautomatic adjustment of geld tain gumonetary authorities ofthe gold standardecinn should quantitieg valnG0ld parities by buying and selling gold 3 unlimited currency anf aaa Fates: Morevver, the gold value of ta, domestic te stant, Must neither be overvalued nor undervalved. Tt should also be stable, 7. Finally sama onetary authorities must be willing to conform to arn even atthe costof sacrificing thaconflicting ras yi suunctary policy. The various independent oteces ct of ay Hien ust Be twholly subardinated to the intersater “Fauelary motives, Ia Keyaies words, the mechanism Fequires that TN? terion of We baking policy ofeach country should hee larly, import andiard m of dom monet (Financial Management Bur of all the other members, it Seatribution being modest one.” of the International G Standard sufters from a series of lin drawback of the gold standard (Power to adopt the particular mon to its internal economic conditic S15 subjected to international pra Stability and exchange stability, the eligy, cannotbe, reconciled under the Ss the country to surrender the co # Under the gold standard mechan Bd at the expense of internal econom BS opinion of Halm, the gold standard Sef The mechanism can function only m ved. “It is fair weather craft of doul Msters. When the necessary conditions dard is abandoned, and it becomes @e anage the had situation.” S855 violont strains on the economic Seuntries bo play according to the ru onal gold standard cannot he rega Be be managed by the central banks o oles of the gold standard game. Cred SSsions a3 per the rules are to be pursued, Sous operations. Oftentimes the central sin a policy to reduce costs and price Bat or to create enough demand for ney doan Robinson remarked that’ th Suilers from an “inhorent bias towards¢ Blacks suflicient reciprocity. The gold-losi Sempulsion to contract the curreney but Bet compelled by law to expand’ the eurre edit through bay s diffieult to expand ere Thus, while the yold-losing country suf He country may or may not experience it rey regarded the gold standard as a sta ‘eontro].” ofa uniformity in credit expansion or« Peetpating contr, the god vectors a