ABSTRACT
INTERNATIONAL as well as domestic economic stability presupposes stability in the value of money as a sine qua non, among other requirements. The external value of money or the domestic price of foreign currencies on the foreign exchange market is determined diversely under different monetary standards, and the way in which it is determined affects domestic and international economic welfare differently. It is therefore necessary to examine both the theoretical basis and the practical implications of various international currency systems. We shall consider three typical monetary standards, namely, (a) the gold standard, (b) the paper standard, and (c) the mixed standard—the International Monetary Fund. Our discussions in this chapter and the two following may serve as a background for an understanding of the more complex problems of international and domestic equilibrium presented in the last two chapters. We shall begin with the gold standard.
