Discuss the asymmetric adjustment problem under the gold standard. What component of the Keynes plan was aimed at addressing this problem?

Discuss the asymmetric adjustment problem under the gold standard. What component of the Keynes plan was aimed at addressing this problem?

 

Answer:

Asymmetric adjustment problem under the gold standard are

-pegged rate or adjustable peg currency regime and problem to correct fundamental disequilibrium in balance of payment.

-if exchange rates were not to float freely, states would also require assurance of an adequate supply of monetary reserves

– removing of existing exchange controls limiting currency convertibility and return to a system of free multilateral payments

Keynes plan was aimed at addressing the source for supplementary source of liquidity for deficit countries. Keynes proposed for creation of new reserves by world central bank at will.

Asked on February 15, 2018 in economics.
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