Political Science · International Relations
Bretton Woods failed due to:
AThe US decision to suspend gold convertibility
BAn inflationary monetary policy
CConsolidation of the world political system
DBoth the suspension of gold convertibility and inflationary policy ✓ Correct
Correct answer: (D) Both the suspension of gold convertibility and inflationary policy — Bretton Woods failed due to both these monetary factors, so the answer is both.
Explanation
★Bretton Woods failed due to both these monetary factors, so the answer is both.
★In 1971 the US suspended the convertibility of the dollar into gold.
★This ended the gold-dollar anchor of the system.
★At the same time inflationary US policy strained fixed exchange rates.
★The pressures made fixed rates impossible to hold.
★So both gold-suspension and inflation together brought it down.
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