Under the Bretton Woods System,an Asymmetry in the Ability of Central

question 18

Multiple Choice

Under the Bretton Woods system,an asymmetry in the ability of central banks to defend their exchange rates existed because

• A) a country experiencing a balance of payments surplus was limited in its ability to defend its exchange rate by its stock of international reserves.
• B) a country experiencing a balance of payments deficit was limited in its ability to defend its exchange rate by its stock of international reserves.
• C) central banks were allowed by the IMF to adjust their exchange rates upward whenever they chose, but were rarely allowed to adjust their exchange rates downward.
• D) central banks were allowed by the IMF to adjust their exchange rates downward whenever they chose, but were rarely allowed to adjust their exchange rates upward.

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