During the 60s, the United States' trade deficit grew. The U.S. dollar was losing some of its status and people were increasingly exchanging it for gold. In 1971, President Nixon suspended the dollar's convertibility into gold and devalued the American dollar in terms of gold and other currencies. QUESTION: What are likely consequence(s) (good or bad) of Nixon's abandonment of the gold standard and devaluation of the U.S. dollar? Select ALL relevant answers, if any. American gold reserves would be depleted. American exports would increase The U.S. could more easily finance a war through inflation (by 'printing money'). American trading partners would become less competitive (their goods will be pricier), unless they also devalue their currencies. American consumers would pay more for imported products.
During the 60s, the United States' trade deficit grew. The U.S. dollar was losing some of its status and people were increasingly exchanging it for gold. In 1971, President Nixon suspended the dollar's convertibility into gold and devalued the American dollar in terms of gold and other currencies. QUESTION: What are likely consequence(s) (good or bad) of Nixon's abandonment of the gold standard and devaluation of the U.S. dollar? Select ALL relevant answers, if any. American gold reserves would be depleted. American exports would increase The U.S. could more easily finance a war through inflation (by 'printing money'). American trading partners would become less competitive (their goods will be pricier), unless they also devalue their currencies. American consumers would pay more for imported products.
Chapter29: International Finance
Section: Chapter Questions
Problem 2P
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