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INB 205 Wk 2 CheckPoint - International Relationships - Appendix B - 25 of 25

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You did a good job discussing the gold standard and narrating positive and negative
aspects of using a gold standard. However, in your analysis of the foreign exchange
markets, you did not discuss the International Monetary Fund, Explain the purpose of
the World Bank and its International Finance Corporation nor did you Identify the world’s
major foreign currency exchange (Fx) markets of the world ( - 20 points).
GRADE: 80/100
Foreign Exchange Markets Summary
Your name
Axia College University of Phoenix
Foreign Exchange Markets 1

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Abstract
Gold has been found and extracted on all continents. Throughout history gold has been a
symbol of value, a method of payment, and a means of ostentation. Although not currently used
by any government, the gold standard established a form of monetary equalization, has been
replaced by the fiat money system.
Foreign Exchange Markets 2

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Foreign Exchange Markets
Brief History of Gold
Although primarily used for personal adornment, early Egyptian Kings did issue some
gold coins between the fourth to sixth dynasties. King Croesus issued the first gold coin stamped
with his royal emblem on a large-scale in ancient Lydia from 560-546 B.C. The worldwide trade
and commerce standard of exchange was eventually based off King Croesus coins. In 546 B.C.
the collapse of the Lydian Empire allowed the Persians to gain control of Asia’s gold. Named
after Darius the Great, the daric became the Persian Empires standard gold coin between 521 -
486 B.C.
Alexander the Greats conquest of Persia established a system of coinage for Macedonia
between 336 - 323 B.C. that eventually moved into Europe; allowing Emperor Augustus to
establish a gold currency known as the aureus between 31 B.C. and A.D. 14; which helped
expand the Roman economy. By the 5th century when the Roman Empire collapsed gold had
been used for many hundreds of years. Gold became so desirable that by 1521 “Europeans began
to finance expeditions in search of the great source of gold” (The Federal Reserve Bank of New
York, 2004).
The Gold Standard
The Coinage Act of 1792 set the official price of gold at $19.75 a troy ounce; creating the
gold standard. The gold standard is a “monetary system under which a nation’s currency may be
converted into bills of exchange drawn on a country whose currency is convertible into gold at a
stable rate of exchange” (Encyclopædia Britannica Online, 2009). In other words this means the
government can only print as much money as its country has in gold. The gold standard required
participating countries to give absolute priority to external adjustment over domestic objectives.
Foreign Exchange Markets 3

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