<P> The assumptions of this mechanism are: </P> <Ol> <Li> Prices are flexible </Li> <Li> All transactions take place in gold </Li> <Li> There is a fixed supply of gold in the world </Li> <Li> Gold coins are minted at a fixed parity in each country </Li> <Li> There are no banks and no capital flows </Li> </Ol> <Li> Prices are flexible </Li> <Li> All transactions take place in gold </Li>

When is a system of currency exchange most likely to be used