Author Question: Refer to Figure 3-1. An increase in the price of the product would be represented by a movement from ... (Read 114 times)

appyboo · **on:** Jun 29, 2018

Refer to Figure 3-1. An increase in the price of the product would be represented by a movement from

A) A to B. B) B to A. C) D1 to D2. D) D2 to D1.

Question 2

What is destabilizing speculation? What role did it play in the collapse of the Bretton Woods system?

What will be an ideal response?

sultansheikh · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

B

Answer to Question 2

Destabilizing speculation refers to actions by investors that make it more difficult to maintain a fixed exchange rate. Destabilizing speculation in 1971 against the German mark led to the collapse of the Bretton Woods System. Investors became convinced in early 1971 that Germany would have to allow a revaluation of the mark against the dollar. Investors increased their demand for marks, which increased the shortage of marks. The West German government finally opted out of the fixed exchange-rate system and allowed the mark to float against the dollar.