請問關於大蕭條前美國放寬貨幣供應的問題

The questions can be asked by an article written by David Hume: "the price-specie-flow mechanism".

This article gave a logical argument to how balance of payment could be achieved with gold standard in place. After WWI, US restored the gold standard. Each US dollar could be exchanged with 20.67 grains of gold. Later in 1925, British restored the gold standard and pegged the gold contain to 113 grain to 1 pound.

At around WWI, the US was one of the largest gold producing countries and the goods in US were manufactured in a relatively inexpensive price compared to the UK (new world with abundant resources). The gold reserve in US was increasing (net inflow).

At this moment, the total gold reserve in Britain was far less than she had before the war and the US had a huge supply of gold. In order to fully restore gold standard between both countries, some balancing act had to be done.

According to "the price-specie-flow mechanism", the British will have a contraction in currency or a decrease of money supply due to a lack of sufficient gold reserve. In this case, the cost of goods manufactured in Britain would have decreased. Import would have been decreased whereas export would have been increased. In this case, gold would have been exported out from the US at the "gold point" and the currencies of both countries would have been stabilized. Thus, gold standard would have been restored in both countries.

To answer the questions:
1. Due to the depleted gold reserve in UK, money supply would shrink and cause deflation.
2. In order to restore gold standard between both countries, the gold inflow of US had to be reversed.
3. When US experienced inflation, price of goods in the US would increase and export would decrease. In terms, more imports would increase. Therefore, the gold inflow would be gradually change back and currencies between both US and UK will be stabilized.

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