Question

Define:

The Gold Standard

Bretton Woods

Smithsonian Agreement

Maastricht Agreement

European Currency Unit and the Euro

Answer 1

The gold standard- The gold standard is a monetary system that has a value directly linked to gold in the currency or paper money of a country. Countries have agreed to convert paper money into a fixed amount of gold with the gold standard. A country using the gold standard sets a fixed gold price and at that price buys and sells gold. The fixed price is used to determine the currency's value. For instance, if the U.S. sets the gold price at $500 an ounce, the dollar's value would be 1/500th of a gold ounce.

Bretton Woods- After the 1944 Bretton Woods Treaty, the Bretton Woods monetary management system laid down guidelines for economic and financial ties between the United States, Canada, Western European countries, Australia, and Japan. The Bretton Woods process was the first instance of a strictly developed monetary order for independent states to control financial ties. The Bretton Woods system's main features were an obligation for each country to follow a monetary policy that preserved its foreign exchange rates within 1 percent by binding its currency to gold and the IMF's ability to resolve temporary trade imbalances.

Smithsonian Agreement- The Smithsonian Agreement, announced in December 1971, created a new dollar standard by which currencies were linked to the US dollar by a number of industrialized nations. These currencies have been allowed to fluctuate against the dollar by 2.25 percent. The Smithsonian Agreement was established by the Group of Ten (G-10) nations (Belgium, Canada, France, Germany, Italy, Japan, the Netherlands, Sweden, the United Kingdom, and the United States) increased the gold price to 38 dollars, a rise of 8.5 percent over the previous price at which the U.S. government agreed to redeem gold dollars. The rising gold price actually devalued the dollar by 7.9%.

Maastricht Agreement- The Treaty of Maastricht (officially the Treaty on European Union) was signed by the members of the European Communities in Maastricht, the Netherlands, on 7 February 1992 with a view to further European integration. The same city hosted the European Council that drew up the treaty on 9–10 December 1991. The Treaty created the European Union and its pillar framework, which remained in place until the Treaty of Lisbon entered into force in 2009. The Treaty also significantly expanded the EEC / EU competences and led to the creation of the euro, the single European currency.

European Currency Unit and the Euro- The European Currency Unit was a parity basket of the currencies of the Member States of the European Community, used as the European Community's account unit before being replaced by the euro on 1 January 1999. On 13 March 1979, at parity, the ECU itself replaced the European Unit of Account. The European Exchange Rate Mechanism sought to minimize fluctuations between the currencies of Member States and the ECU. The ECU was also used in certain international financial transactions where its advantage was that securities denominated in ECUs offered investors the opportunity to diversify abroad without relying on a single country's currency