Which of the following is a factor that initiated the collapse of the fixed exchange rate system?
A) Worsening of Great Britain's balance of trade
B) Recession in third world countries
C) Price inflation in Europe
D) Worsening of U.S. foreign trade position

Question

Quizplus · Accepted Answer

U.S. dollar had a special role in the fixed exchange rate system as the only currency that could be converted into gold. This meant that any pressure on the dollar would devalue the system. The increase in inflation and the worsening of the U.S. foreign trade position gave rise to speculation in the foreign exchange market that the dollar would be devalued. This initiated the demise of the fixed exchange rate system.

Which of the Following Is a Factor That Initiated the Collapse