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Which Of The Following Statements Is True Of The Bretton Woods Agreement

The Bretton Woods Agreement was launched in 1944 at a conference of all allied nations of the Second World War. It took place in Bretton Woods, New Hampshire. Countries that had both gold and silver as bargaining chips – as the bimetalism system is called – often had problems to solve by Gresham`s law. What does Gresham`s law say? Answer the following questions, then tap „Send“ to get your score. The agreement created the World Bank and the International Monetary Fund (IMF), U.S.-backed organizations, to oversee the new system. The following three aspects of a monetary system are incompatible: monetary independence; (A) exchange rate; and (B) . At the end of the conference, John Maynard Keynes captured the importance of international cooperation as a hope for the world. „If we can go on… The brotherhood of man will have become more than a sentence,“ he said. As we look forward to welcoming Andorra as our 190th member, the work of the IMF testifies to the values of cooperation and solidarity on which a brotherhood and brotherhood of humanity is built. All countries in the Bretton Woods system have agreed to a firm commitment to the U.S. dollar, with deviations of only 1%.

Countries were required to monitor and maintain their monetary commitments, which they achieved primarily by using their currency to buy or sell U.S. dollars as needed. The Bretton Woods system has therefore minimized the volatility of international exchange rates that has helped international trade relations. Greater stability in foreign exchange exchange has also been a factor in the success of the World Bank`s support of international loans and subsidies. During the Bretton Woods era, the global economy grew rapidly. Keynesian economic policy has allowed governments to mitigate economic fluctuations and recessions have been generally weak. However, tensions began to manifest in the 1960s. Persistent, albeit low, global inflation has made the price of gold too low in real terms. A chronic U.S. trade deficit drained U.S. gold reserves, but the idea of devaluing the dollar against gold was strongly opposed.

In any event, this would have required an agreement between the surplus countries in order to increase their exchange rates against the dollar in order to obtain the necessary adjustment. Meanwhile, the pace of economic growth has meant that the level of international reserves has generally become insufficient; The invention of the „Special Drawing Right“ (SDR)[1] did not solve this problem. While capital controls had not yet been carried out, they were significantly lower in the late 1960s than in the early 1950s, increasing the prospects for capital flight or speculation against currencies deemed weak. The Bretton Woods countries have decided not to give the IMF the power of a global central bank. Instead, they agreed to contribute to a solid pool of national currencies and gold, which would be held by the IMF. Each member country of the Bretton Woods system then had the right to borrow as part of its dues, which it needed. The IMF was also responsible for implementing the Bretton Woods agreement. Gold has often been physically sent abroad to pay for the current account imbalances that have influenced the real domestic money supply.

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