hered to. demand for international reserves o

Macroeconomics: Principles and Policy (MindTap Course List)
13th Edition
ISBN:9781305280601
Author:William J. Baumol, Alan S. Blinder
Publisher:William J. Baumol, Alan S. Blinder
Chapter19: The International Monetary System: Order Or Disorder
Section: Chapter Questions
Problem 8DQ
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Under the Bretton Woods system

Group of answer choices
a strict gold standard adhered to.
demand for international reserves outpaced the supply of gold
the US and the Yen were tied to one another.
Nixon kept the gold window open until the collapse of the system.
Expert Solution
Step 1

Before Bretton woods system, gold standard was followed where countries peg there currencies with gold. The trade was based on gold reserves. But Bretton Woods system after 1945 started where countries pegged there currencies with US dollar and not gold. With trade balances grows larger and larger deficit, the liabilities on US gold reserves outpace US assets, thereby US closing Gold window in 1971

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