According to the Bretton Woods agreement, if a currency became too wea

QUESTION

According to the Bretton Woods agreement, if a currency became too weak to defend, a devaluation of up to 10 percent would be allowed without any formal approval by the International Monetary Fund.

Indicate whether the statement is true or false.

ANSWER

TRUE
An aspect of the Bretton Woods agreement was a commitment not to use devaluation as a weapon of competitive trade policy. However, if a currency became too weak to defend, a devaluation of up to 10 percent would be allowed without any formal approval by the International Monetary Fund (IMF). Larger devaluations required IMF approval.