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Questions and Answers
What was the basis of international economic exchange in the pre-World War I global monetary system?
What was the basis of international economic exchange in the pre-World War I global monetary system?
What was a key feature of the Bretton Woods Agreement?
What was a key feature of the Bretton Woods Agreement?
What was the main concern expressed by countries in the late 1960s regarding the US dollar?
What was the main concern expressed by countries in the late 1960s regarding the US dollar?
What is the Triffin Paradox named after?
What is the Triffin Paradox named after?
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What are the current reserve currencies for world products and services?
What are the current reserve currencies for world products and services?
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What was the main advantage of the Bretton Woods system over the gold standard?
What was the main advantage of the Bretton Woods system over the gold standard?
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What was the Triffin Paradox concerned with?
What was the Triffin Paradox concerned with?
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What was the impact of the US trade balance turning to a deficit?
What was the impact of the US trade balance turning to a deficit?
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What was the pre-World War I global monetary system based on?
What was the pre-World War I global monetary system based on?
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What was the main concern expressed by countries in the late 1960s regarding the US dollar?
What was the main concern expressed by countries in the late 1960s regarding the US dollar?
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Study Notes
Pre-World War I Global Monetary System
- The basis of international economic exchange was primarily the gold standard, which facilitated fixed exchange rates between currencies.
- Countries adhered to fixed gold conversion rates, creating stability in international trade and investment.
Bretton Woods Agreement
- Established in 1944, it aimed to create a system of monetary management for post-World War II.
- A key feature was the fixed exchange rate system, where currencies were pegged to the US dollar, which in turn was convertible to gold.
Concerns in the Late 1960s
- Countries expressed anxiety over the US dollar's value due to excessive printing and trade deficits, fearing a loss of confidence in the dollar as a stable reserve currency.
Triffin Paradox
- Named after economist Robert Triffin, it highlights the conflict between national interests and international monetary stability.
- It points out that a country providing the world's reserve currency must run trade deficits to supply enough currency globally, leading to long-term instability.
Current Reserve Currencies
- US dollar remains the principal reserve currency.
- Euro, Japanese yen, British pound, and Swiss franc are also significant reserve currencies used for global transactions.
Advantages of the Bretton Woods System
- Provided greater flexibility compared to the gold standard, allowing for managed adjustments to exchange rates rather than strict adherence to fixed rates.
- Facilitated international economic cooperation and growth through stable exchange rates.
Concerns of the Triffin Paradox
- The paradox warns that reliance on a single national currency can undermine its value over time, risking economic instability and a potential crisis in international monetary systems.
Impact of US Trade Deficit
- The shift to a trade deficit raised concerns globally, leading to decreased confidence in the US dollar and prompting discussions on the future of the dollar as a reserve currency.
- Increased imports relative to exports stimulated debates on US economic policies and their global implications.
Overview of Pre-World War I Monetary System
- Based on fixed exchange rates and adherence to the gold standard, encouraging international trade by reducing currency risk.
- Facilitated an era of globalization and economic interdependence among industrialized nations.
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Description
Test your knowledge of the international monetary system with this chapter 6 IBT reviewer quiz. Explore the pre-World War I gold standard and the fixed exchange rate system, and understand the rules governing global monetary exchange between countries.
