UPSC Prelims Practice Questions — Britain’s gold position

Q1. With reference to Britain's return to the gold standard in 1925, which of the following are correctly identified?

1. It restored the pound at the pre-war parity of £1 = $4.86.
2. Winston Churchill, as Chancellor of the Exchequer, introduced the measure.
3. Britain first adopted the gold standard only in the 1870s, alongside Germany and France.
4. The gold backing the pound was held in the Issue Department of the Bank of England.

• A. 1, 2 and 4
• B. 2 and 3
• C. 1 and 4
• D. 1, 2, 3 and 4

Q2. Which of the following is NOT a correct feature of Britain's 1925 return to the gold standard?

1. The pound was fixed at its pre-war parity of $4.86.
2. Winston Churchill was the Chancellor of the Exchequer responsible.
3. The gold backing was held in the Issue Department of the Bank of England.
4. It introduced a freely floating exchange rate for the pound.

• A. 1 only
• B. 4 only
• C. 2 and 3
• D. 1 and 4

Q3. Under the gold standard, the legal gold backing for the pound sterling was held primarily in which one department of the Bank of England?

• A. Issue Department
• B. Banking Department
• C. Discount Office
• D. Exchange Equalisation Department

Q4. The statutory rule dividing the Bank of England's note issue into a limited fiduciary issue and a gold-backed issue was established under the Bank Charter Act passed in which year?

• A. 1816
• B. 1821
• C. 1844
• D. 1925

Q5. The General Strike, precipitated partly by the deflation flowing from Britain's overvalued pound, took place in which year?

• A. 1921
• B. 1925
• C. 1926
• D. 1931

Q6. In the context of Britain's overvalued pound after 1925, the term 'deflation' refers to:

• A. A sustained general fall in the level of prices and money wages
• B. A rise in the gold value of the pound through fresh gold imports
• C. The suspension of convertibility of notes into gold
• D. An increase in the fiduciary note issue of the Bank of England

Q7. With reference to Britain's 1931 departure from the gold standard compared with earlier episodes, consider the following statements. Which of the statements given above is/are correct?

1. Britain suspended gold convertibility in 1931, as it had earlier suspended convertibility in 1914 at the outbreak of the First World War.
2. The 1931 sterling crisis was triggered partly by the May 1931 failure of Austria's Creditanstalt bank.
3. After leaving gold in 1931 the pound appreciated and British output continued to fall.

• A. 1 only
• B. 1 and 2 only
• C. 2 and 3 only
• D. 1, 2 and 3

Q8. The suspension of the pound's gold convertibility in 1931 was operationally carried out through which institution that held the nation's gold reserves?

• A. Bank of England
• B. Board of Trade
• C. Royal Mint
• D. International Monetary Fund

Q9. Regarding the interwar gold exchange standard and the Genoa Conference of 1922, which of the following is NOT correct?

1. The Genoa Conference of 1922 recommended that most central banks adopt a gold exchange standard.
2. Under the gold exchange standard, central banks could hold reserves in both gold and foreign exchange.
3. The arrangement was intended to economise on scarce monetary gold.
4. The Genoa Conference recommended abandoning fixed exchange rates in favour of freely floating currencies.

• A. 1 only
• B. 4 only
• C. 2 and 3
• D. 3 and 4

Q10. In 1926 the official figure for the Bank of England's gold reserves was disclosed to the House of Commons by the Financial Secretary to which government department?

• A. The Treasury
• B. The Board of Trade
• C. The Home Office
• D. The Foreign Office

Q11. With reference to recent central bank gold trends, which of the following are correctly identified?

1. Central banks bought a record of about 1,180 tonnes of gold in 2024.
2. 2024 was the third consecutive year in which central bank purchases exceeded 1,000 tonnes.
3. The RBI's gold reserves stood at about 880 tonnes at the end of March 2025.
4. The RBI sold over 50 tonnes of gold during 2024-25.

• A. 1 and 4
• B. 1, 2 and 3
• C. 2 and 4
• D. 1, 2, 3 and 4