Under the Bretton Woods System, the par rate per British pound was defined as a fixed number of United States (US)dollars per pound. If this were set above its equilibrium value, then:

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If the par rate per British pound was set above its equilibrium value, the supply of pounds would exceed the demand for pounds. This would cause the value of the pound to appreciate, making British goods more expensive and less competitive in the international market. To maintain the fixed exchange rate, the British central bank would need to buy pounds with US dollars, increasing the supply of dollars and decreasing the supply of pounds, ultimately pushing the exchange rate back to its equilibrium value.

Under the Bretton Woods System, the Par Rate Per British