The Bretton Woods system
A) created flexible exchange rates following World War II
B) was the predecessor to the North American Free Trade Agreement (NAFTA)
C) replaced the European Exchange Rate Mechanism (ERM)
D) tied the dollar to gold and other currencies to the dollar
E) is the clearinghouse process by which nations buy and sell reserves of foreign currency

Question

Quizplus · Accepted Answer

The Bretton Woods system, established in 1944, tied the value of the US dollar to gold, and fixed the exchange rates of other currencies to the dollar. This allowed for stability in international trade and investment, but eventually led to its collapse in the 1970s due to economic pressures and currency speculation.

The Bretton Woods System