Describe the Bretton Woods currency system? What will be an ideal res

Describe the Bretton Woods currency system?

What will be an ideal response?

ANSWER

Answer: In the Bretton Woods System, in place between 1944 and 1973, the participating countries agreed to an exchange rate regime that linked their exchange rates to the dollar. They could fluctuate in a 1% band around a fixed parity. The dollar itself had a fixed gold parity ($35 per ounce). When a country ran into a temporary balance of payments problem (a current account deficit) that threatened the currency peg, it could draw on the lending facilities of the IMF, also established at Bretton Woods in 1944, to help it defend the currency. Countries were also allowed to change their parities when their balances of payments were considered to be in “fundamental disequilibrium.”