ADVANTAGES AND DISADVANTAGES OF GOLD STANDARD

DISADVANTAGE OF GOLD STANDARD –

1 Offer

• One disadvantage of the gold standard is that there is a limited supply of gold. If nations can only print as much money as they can back with gold, there could be a shortage of money.
• History shows that shortages of money lead to hoarding. This stifles economies, since people buy and sell less.

2 Economic policy

• A disadvantage of the gold standard is that it restricts the ability of governments to make economic policy. A common practice during difficult economic times is to increase the money supply to stimulate the economy.
• This would not be possible under the gold standard because the supply of the currency is limited by the supply of gold. Money can only be increased if more gold is extracted from mining or bought.