Question

Before the Great Depression, the United States used gold to back up the currency it issued. Why was the use of this gold standard MOST LIKELY a factor which led to Great Depression?
A) The government could not issue more currency than it had gold.

B) The government could not back currency with metals such as silver.

C) Other countries used up most of the gold to back their own currency.

D) The cost of World War I used up the government’s supply of gold.

Answer 1

Answer:

A

Explanation:

Because the government could not issue more currency than it had gold, the money supply ran low. The low supply made investing and spending very difficult. An economy cannot grow if it does not have spending and investing.

Answer 2

A) The government could not issue more currency than it had gold.  

As the U.S. was coming to an economic crisis, by 1929 people didn't trust any financial institution anymore and the atmosphere was filled with high speculations about the value of the American currency and other nations' in the near future. As a result, people began to hoard more gold, the strongest asset, its demand increased sharply as well as its prince, and the government could not issue more currency than it had gold.