Why Was There Very Little Fluctuation in the Foreign Exchange

question 27

Multiple Choice

Why was there very little fluctuation in the foreign exchange rate in the period 1945-1973?

• A) This was a period when the world economy was very stable.
• B) There was very little growth in the world economy between 1945 and 1973.
• C) Countries linked their currency to the U.S. dollar, which was backed by gold reserves.
• D) Most currencies were pegged to the British pound, which could be converted to sterling silver.

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Definitions:

Check

A written, dated, and signed instrument that directs a bank to pay a specific sum of money to the bearer.

Shelter Principle

A legal doctrine in property law that allows a person who acquires property in good faith and without notice of prior claims to be protected from those claims.

Holder

In financial terms, an individual or entity that possesses a negotiable instrument, such as a check or bond, legally.

Holder In Due Course

A legal term for a person who has acquired a negotiable instrument in good faith and for value, and thus has certain protections against defenses and claims that could be asserted against the original payee.