Unit  -  2

The World between Two World Wars Breakdown of the International System of Exchange Despite emergency measures such as cutbacks in expenditure and increased taxation, the situation did not improve in England. So England decided to leave the Gold Standard. Immediately a great number of countries left the gold standard. Each nation adopted a policy of protectionism and devaluation of currency.

Devaluation forced creditors to stop lending. This led to a world-wide credit contraction. Thus the defensive measures adopted by various nations to safeguard their economic interests led to an unprecedented decline in world economic activity. As its effect was deep and prolonged economists and historians call it the Great Depression.

Gold Standard is a monetary system where a country’s currency or paper money carried a value directly linked to gold.