Suppose the world was on the gold standard.If the U.S.ran persistent trade deficits,all of the following would occur except

A) the U.S.money supply would decline.
B) the U.S.would have a falling average price level.
C) U.S.interest rates would most likely rise.
D) gold would flow into the United States.
E) the U.S.trade deficit would disappear.

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ALBERT NORMAN · Accepted Answer

Final Answer : D, Explanation :  Under the gold standard, a country with a trade deficit would see gold flowing out of the country, not into it, to settle the trade imbalances. This outflow of gold would lead to a decrease in the money supply, potentially lower price levels, possibly higher interest rates to attract foreign capital, and over time, a correction of the trade deficit.

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