The Bretton Woods system could work only as long as the U.S. inflation

QUESTION

The Bretton Woods system could work only as long as the U.S. inflation rate remained low and the United States did not run a balance-of-payments deficit.

Indicate whether the statement is true or false.

ANSWER

TRUE
The Bretton Woods system could work only as long as the U.S. inflation rate remained low and the United States did not run a balance-of-payments deficit. Once these things occurred, the fixed exchange rate system soon became strained to the breaking point.