Read the text and do the tasks
1. Originally, economists used to think in terms of commodity price rules for issuers of currency to follow. For them the most natural way was to implement a system of property-rights-respecting rules, which imposed on the issuers of currency the obligation to maintain a particular exchange rate between their currencies and one or more commodities.
2. If a bank issues, say, US$1 bills, a commodity standard requires it to ensure that the US$1 bills always exchange for a given amount of a commodity. Because the issuer would maintain a fixed exchange rate between the US$1 bills and a particular quantity (or quantities) of one or more real goods, the nominal price of that good (or goods) would be fixed. Currency issued under these conditions is said to be fully convertible.
3. Commodity standards were the historical norm. The perhaps best remembered commodity standard is the international gold standard. Britain adopted a de facto gold standard in 1717 after the master of the mint, Sir Isaac Newton (1643–1727), re-valued the silver guinea and formally adopted the gold standard in 1819, when the British Parliament abandoned long-standing restrictions on the export of gold coins and bullion from Britain. The US, though formally on a bimetallic gold and silver standard, switched to gold de facto in 1834 and de jure in 1900. In 1834, the US fixed the price of gold at US$20.67 per ounce. It remained at that level until 1933.
(Ansgar Belke : Monetary economics in globalised financial markets / A. Belke, T. Polleit. – Springer, 2009. – P.49).
Define the statements which correspond to the contents of the text.
According to the text, the price of gold in the USA was unfixed until 1900.
Currency is said to be fully convertible if nominal price of goods is established according to the issuer’s will.
As a matter of fact there had been a bimetallic standard over 60 years in the USA, before being turned into gold standard.
Economists wanted issuers to implement a particular system that obliged them to respect an exchange rate between currency and commodities.
