Question

If the U.S. Treasury in 1865 had decided to make the dollar convertible into gold at the pre-War rate, a. relatively cheap British goods would have been highly desired by American consumers. b. the U.S. treasury would have quickly found its stock of gold depleted. c. British citizens would have converted large amounts of pounds into dollars. d. All of the above are correct. e. Only a and b are correct.

Answer 1

Answer: E. Only a and b are correct

Explanation: At the beginning of the war one Confederate dollar would purchase one gold dollar. From October 1861 to March of 1864 the commodity price index rose an average rate of 10 percent per month and when the Civil War ended in April 1865 the cost of one bar of gold was around $100.

If the treasury had decided to convert at the pre war rate of $1 to one gold bar, the British goods and commodities would have become extremely cheap for the Americans and the treasury would have quickly run out of gold bars as the worthless dollars would have converted to several gold bars. The value of the dollar had greatly reduced due to extreme inflation during the war.