Most economists trace the break-up of the fixed exchange rate system to ____________.
A) the U.S. macroeconomic policy package of 1965-1968
B) a worldwide recession
C) Japanese economic policy in the mid 1970s
D) European economic policy in the 1960s and 1970s
E) Japanese and German trade surpluses with the U.S.

Question

Quizplus · Accepted Answer

Most economists trace the break-up of the fixed exchange rate system to the U.S. macroeconomic policy package of 1965-1968, which was characterized by expansionary fiscal and monetary policies that led to inflation and a deterioration in the U.S. balance of payments. This resulted in an outflow of gold from the U.S. and put pressure on other countries to devalue their currencies. Eventually, the Bretton Woods system of fixed exchange rates collapsed, and the world moved towards a system of floating exchange rates.

Most Economists Trace the Break-Up of the Fixed Exchange Rate