Skip to content

IAI Actuarial Core Principles · Business Economics · Recent macroeconomic history

Under the original Bretton Woods system agreed in 1944, which arrangement for exchange rates was adopted?

Bretton Woods pegged member currencies to the US dollar, which was convertible into gold at a fixed price. Parities could be adjusted only in cases of fundamental disequilibrium, making it an adjustable-peg system rather than floating rates or a currency union.

  1. AMember currencies were pegged to the US dollar, which was convertible into gold at a fixed price, with adjustable pegs allowed in cases of fundamental disequilibriumCorrect
  2. BAll currencies floated freely and were determined by daily market supply and demand
  3. CEvery member currency was directly convertible into gold at a separate fixed price held by the IMF
  4. DMembers formed a single currency union with a common central bank
  5. Currencies were pegged to a basket of commodities chosen by the World Bank

Explanation

Bretton Woods created an adjustable-peg system: other currencies were fixed to the dollar, and the dollar was tied to gold at $35 per ounce. Parities could be changed only in fundamental disequilibrium. Free floating and a currency union were not features of the system, and the IMF did not hold gold-convertibility for each currency.

Did you get it right without looking?

One question tells you little. A timed set on Recent macroeconomic history shows your real accuracy, how long you take and where you lose marks.

Practise Recent macroeconomic historyFree diagnostic mock

More Recent macroeconomic history questions