1. Under a gold standard, is inflation possible? Consider both the case for an individual country and the case for the world as a whole.

2. In discussing the situation of countries leaving the gold standard, or "unilaterally devaluing" during the 1930s, Barry Eichengreen of the University of California at Berkeley and Jeffrey Sachs of Columbia University argued: "In all cases of unilateral devaluation, currency depreciation increases output and employment in the devaluing country." Explain how leaving the gold standard in the 1930s would lead to an increase in a country's output and employment.