ICLE’S MJ COLLEGE VASHI

 MEMBER NAMES:-
PRAJKATA CHAVAN
AKSHATA WAIKAR
NISHA DHAPOLA
VAISHALI OJHA
MONICA
RUCITA
INTERNATIONAL MONERTARY
SYSTEM
Gold Standard System(1870-1914):-
 The gold standard was the first universally implemented system for valuing
currencies. It was promoted by banks of England. It was an exchange rate in
which gold coins were freely minted by the central bank of a country .The gold
standard was adopted by UK in 1821,Germany in 1875,France in 1878,US in
1879, and Russia in 1897.

Gold Exchange Standard(1925-1933):-

Features of Gold Standard System:-
The main features of this system were:-
 Each country was required to establish a Central bank with an exclusive
authority to print and issue their respective currency notes.
 The country’s gold reserves were required to be on custody of Central Bank.
 Each Central Bank was required to announce an official price of gold and to
provide an irrevocable guarantee to buy and sell unlimited quantity of gold at
official price.
 Each currency note was required to contain an irrevocable promise to redeem
the note on demand against specified quantity of gold.
Advantages of Gold Standard:-
 It is very easy system to implement and operate .
 It provided fully secured payment and settlement through transfer of gold from deficit to surplus
country.
 It provided for a very high level stability in exchange rates which promoted international trade
and investment .
 It provided an in-built mechanism for achieving equilibrium in an international trade called
“Price Species adjustment Mechanism”.

Disadvantages of Gold Standard :-

 It did not provide for revision of gold price in keeping with the increasing manufacturing
cost of gold.
 It was a very inflexible system due to which it was difficult to adjust money supply during
economy stress in situation such as natural disaster , war etc.
 PSAM was ineffective in situation where a country had recurring trade deficit .
 It contributed to recessions due to which deficit countries suffered lower investments and
employment opportunities .