The gold standard had two main drawbacks: (1) ______________ and (2) ______________.
Fill in the blank(s) with the appropriate word(s).
It will work only if participating nations are willing to accept periodic inflation and unemployment; It will work only when the gold supply increases as quickly as the world's need for money
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Information costs
A) are the costs of buying and selling financial claims. B) include the costs that savers incur to determine the credit worthiness of borrowers. C) include the costs borrowers incur to discover the best investments to make with the money they have borrowed. D) are zero in financial markets, but high for transactions carried out through financial intermediaries.
According to the Theory of the Second Best, why might market liberalization through elimination of some market distortions, such as particular trade restrictions, lead to social welfare losses?
What will be an ideal response?