Question

According to the Bretton Woods agreement, member countries were required to maintain its exchange rate within ±1 percent of it stated par value by:

Multiple Choice

• buying or selling gold as necessary.

• None of the options.

• increasing or decreasing their money supply as necessary.

• buying or selling foreign exchanges as necessary.

• expanding or contracting the supply of loanable funds as necessary.

Answer 1

The chief features of the Bretton Woods system were an obligation for each country to adopt a monetary policy that maintained its external exchange rates within 1 per cent by tying its currency to gold and the ability of the IMF to bridge temporary imbalances of payments

Thus the answer is a)

• buying or selling gold as necessary.