The architects of the Bretton Woods agreement wanted to avoid high unemployment,so they built limited flexibility into the fixed exchange rate system.Which of the following is a major feature of the International Monetary Fund (IMF)Articles of Agreement that fostered this flexibility?
A) Competitive currency devaluations
B) Lending facilities
C) Communist ideologies
D) Floating exchange rates
E) Unrestricted authority to print currency

Question

Quizplus · Accepted Answer

The IMF Articles of Agreement provide for lending facilities to member countries experiencing balance of payments difficulties. This allows countries to borrow from the IMF and avoid unemployment due to restrictions on trade and currency exchanges. The other options are not features that foster flexibility in the fixed exchange rate system. Choice A, competitive currency devaluations, would actually lead to instability and uncertainty. Choice C, communist ideologies, is not relevant to the IMF or Bretton Woods agreement. Choice D, floating exchange rates, is the opposite of fixed exchange rates and was not part of the original agreement. Choice E, unrestricted authority to print currency, would lead to inflation and devalue the currency, also not fostering stability or flexibility.

The Architects of the Bretton Woods Agreement Wanted to Avoid