Darby Quast, Chapter 11, Question 6

The description of the gold standard stood out to me while reading chapter 11.  At first, it seemed as though this was a logical solution to coordinating exchange rates.  Having a gold standard would create extremely predictable exchange rates.  If  an ounce of gold is worth 10 dollars in America, and worth 1 Yen in Japan, you would therefore receive ten dollars for every Yen.  To me, this seemed to simplify an incredibly complicated process.  It also makes sense to me that the dollar would have some intrinsic value.  The fact that the dollar can be worth close to nothing is a hard concept to grasp.   When it is tied to something like gold, it gives it value.  There are many problems with this system, which is why it is not used in the modern world.  The federal reserve would not be able to devalue he currency, which is a major way to fight off a recession.  They would also be more likely o raise interest rates and cut spending to try and protect their gold.  Both these things would hurt an economy  in a recession rather than help it out of one.