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Bretton Woods System Vs The Classical Gold Standard
Bretton Woods System Vs The Classical Gold Standard
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The Classical Gold
standard
Be dominated in 19 centuries until WWI
Characteristics:
The value of each country’s currency is defined in
terms of a fixed weight of gold
Domestic currency is freely convertible to gold.
Disadvantages:
- Exchange rate rigidity
- Pressure put on the United States
- Structure problems: US had to maintain increasing trade
deficits. But the US was not able to devalue the dollar
=> The Bretton Woods system had been lasted until 1971. By 1973,
the United States and other nations agreed to allow exchange rates
to float.
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