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CMA Final · Strategic Financial Management · The International Financial Environment

Under the Bretton Woods system, which arrangement applied to member currencies?

Under Bretton Woods, member currencies were pegged to the US dollar, and the dollar was convertible into gold at a fixed price. This made the dollar the system's anchor. The SDR was created later and was never the anchor currency.

  1. AEach currency was pegged to the US dollar, and the US dollar was convertible into gold at a fixed priceCorrect
  2. BAll currencies floated freely against gold alone
  3. CEach currency was pegged to the IMF's Special Drawing Right with no gold link
  4. DCurrencies were fixed to a basket chosen separately by each country with no common anchor

Explanation

Bretton Woods (1944) set up an adjustable-peg system. Members fixed their currencies to the US dollar, and the dollar was convertible into gold at a fixed price. The SDR came later in 1969 and was not the anchor, so the SDR option is wrong.

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