Author Question: Describe the Bretton Woods system. Why did the United States leave the Bretton Woods system and ... (Read 152 times)

yoooooman · **on:** Sep 3, 2018

Describe the Bretton Woods system. Why did the United States leave the Bretton Woods system and adopt floating exchange rates to determine currency values?

What will be an ideal response?

Question 2

In what ways can private investors affect a currency's value? In what ways can a government's central bank affect the value of the state's currency? How are the role and the interests of the government different from that of a private investor?

What will be an ideal response?

helenmarkerine · **Reply #1 on:** Sep 3, 2018

Answer to Question 1

The United States supported Liberal International Economic Order (LIEO), the set of
regimes created after World War II, designed to promote monetary stability and reduce
barriers to the free flow of trade and capital. Embedded liberalismwas the dominant
economic approach during the Bretton Woods system, which combined open
international markets with domestic state intervention to attain such goals as full
employment and social welfare. Fixed exchange rate, a system in which a government
sets the value of its currency in relation to another country's currency at a fixed rate of
exchange and does not allow it to fluctuate in the global money market, brought stability
to global economic system.

Answer to Question 2

Arbitrage is the selling of one currency (or product) and purchase of another to make a
profit on changing exchange rates. Profits are made by changes in the exchange rat,
which is the rate at which one state's currency is exchanged for another state's
currency in the global marketplace.