One Problem with the Bretton Woods System Was That

question 57

Multiple Choice

One problem with the Bretton Woods System was that

• A) the total number of US dollar reserves held by central banks was greater than US gold reserves.
• B) some countries with overvalued currencies refused to devalue them.
• C) in the early days of the system, many currencies were undervalued versus the US dollar.
• D) gold discoveries caused worldwide inflation.

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Definitions:

Stagflation

A situation in which the inflation rate is high, economic growth rate slows, and unemployment remains steadily high.

Price Level

A measure of the average prices of goods and services in an economy at a given time, often used to evaluate inflation or deflation.

Aggregate Output

The total quantity of goods and services produced in an economy at a given overall price level in a given period.

Aggregate Supply

The overall provision of goods and services that businesses in an economic setup aim to sell during a certain period.