Based on the quoted section & example below:
- Why would the Franc or USD fall in price vs the other if they are both fixed to gold; why would having less gold cause paper money to contract?
- Why would economic growth cause upward pressure on the price of gold in terms of goods and services; yet, downward pressure on the dollar prices of goods and services.
"When a country joined the gold standard its exchange rate against other member countries became fixed. If the exchange rate of, say, the US dollar against the French franc were to fall, then it would be cheaper for American importers of French goods to pay in gold than in depreciated dollars. Gold would flow to France. The US would have less gold to back its supply of paper dollars, which would then contract, pushing up the value of the dollar until it returned to its official price in terms of gold"
Thank you!