Question

You are in charge of your country's currency, which is backed by a gold standard. Unfortunately, gold production is dropping sharply and is not expected to recover. What is your best option?A. Borrow more gold.B. Print more currency.C. Move to fiat currency.D. Take no action.

Answer 1

Answer:

C. Move to fiat currency

Explanation:

Gold Standard

Gold standard is a monetary system where the paper money issued by the government through its monetary authority must be backed a defined quantity of gold. But nations have since moved from that gold standard and to a monetary system known as  Fiat currency. under gold standard the value of money is commensurate with the value of gold backing such a currency.

Fiat currency

When monetary authority issue paper money that is not backed by gold but  with the faith of the issuing authority, such is called fiat currency or fiduciary issue. Fiduciary issues is purely based on trust in the government issuing it.