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Topic: Monetary System 300 Words
Professor’s Guidance for this week’s LE
In July 1944, delegates from 45 of the Allied Powers engaged in World War II, met in Bretton Woods, New Hampshire in the US to plan for the economic institutions believed necessary to assist in the reconstruction, development and growth of the post-war economy (Singer, 1995). Foremost on the delegates’ minds was the instability of the international economic system after World War I including the experiences of hyperinflation as in Germany in 1922-23 and the worldwide depression of the 1930s (Mikesell, 2000). One element believed necessary to avoid repeating the mistakes of the past was to implement a system of fixed exchange rates. Not only could fixed exchange rates help prevent inflation, but they could also eliminate uncertainties in international transactions and thus serve to promote the expansion of international trade and investment (Mikesell, 2000; Singer, 1995). It was further hoped that economic interconnectedness would make it more difficult for nationalism to reassert itself.
Singer, H. W. (1995). Half a century of economic and social development policies of the UN and Bretton Woods institutions. Pakistan Development Review, 34(4), 375+. https://link.gale.com/apps/doc/A182336756/ITBC?u=l…
Mikesell, R. F. (2000). Bretton Woods–ORIGINAL INTENTIONS AND CURRENT PROBLEMS. Contemporary Economic Policy, 18(4), 404. https://link.gale.com/apps/doc/A66881364/ITBC?u=li…
Explain what the Bretton-Wood exchange was. Why was it important and necessary at the time to implement such an exchange? Discuss the circumstances around the decision made by President Nixon to discontinue using the Bretton-Wood exchange.