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International Finance TY BMS Gold Standard Systems Prof. Dipak Abhyankar 9820321404

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Note Be sure that the speakers are on!

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Exchange Rate Regimes Dipak Abhyankar

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Barter System Advantage No Government Intervention No Paper Currency No managed inflation

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Limitations Divisibility Barter System

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Limitations Divisibility Barter System Stocking Value for long

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Limitations Divisibility Stocking value for long Fair price discovery Barter System

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Experiments Sea Shells Clay Tablets Precious Stones

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Gold and Silver MonometalismBimetallism

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Gold Standard Systems Gold Specie Standard Actual Use of Gold Coins

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Gold Specie Standard Actual Use of Gold Coins Advantages People are using real value No certification required Exchange Rate is simple and stable =

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Gold Specie Standard Actual Use of Gold Coins Limitations Larger Space requirement for stocking Inconvenient to Carry Risk of Theft

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Gold Specie Standard

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Gold Bullion Standard

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Currency is pegged with Gold with a specified quantity Pegged

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Gold Bullion Standard Unconditional Promise to convert Fiat Currency to Gold Pegged

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Gold Bullion Standard Advantages Controlled Money Supply Anti Inflationary Exchange Rate is simple and stable Carries advantages of Divisibility, Stocking of credits and easier pricing Pegged

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Gold Bullion Standard Disadvantages Inflationary measures are not possible, and hence full employment and growth objectives are not achieved Difficult to honor unconditional promise in war and crisis Pegged

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Gold Exchange Standard Currency in Gold Exchange Standard is pegged with another currency with specified equation [Currency B] That another Currency is pegged with gold [Currency A] Currency B is in Gold exchange standard Currency A is in Gold Bullion Standard Currency B Pegged Currency A

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Gold Standard Systems Gold Bullion Standard Paper (Fiat) Currency Pegged with Gold Gold Exchange Standard Paper (Fiat) Currency pegged with another currency which in turn is pegged with Gold Gold Specie Standard `Actual Use of Gold Coins

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Money is a headache and Money is the cure