The collapse of the fixed exchange rate system has been traced to the
A)U.S.macroeconomic policy package of 1965-1968.
B)inflexibility of the fixed exchange rate system that led to high unemployment.
C)Marshall Plan,under which the United States lent money heavily to European nations.
D)failure of the International Monetary Fund to impose monetary discipline.
E)increased taxes in the United States to finance its welfare programs.

Question

Quizplus · Accepted Answer

The U.S. macroeconomic policy package of 1965-1968, which included deficit spending, increased government expenditures, and the financing of the Vietnam War, was a major factor in the collapse of the fixed exchange rate system. This policy led to a balance of payments deficit, which caused other countries to lose confidence in the U.S. dollar and abandon their fixed exchange rates.

The Collapse of the Fixed Exchange Rate System Has Been