Part 3: The International Monetary System

What was a primary outcome of the Bretton Woods Agreement?

• The establishment of the Gold Standard as the global monetary system.

• The creation of the World Bank and the International Monetary Fund.

• The initiation of competitive currency devaluations among nations.

• The end of all international monetary cooperation.

Why did the Gold Standard become unsustainable by the start of World War II?

• Countries were unable to print enough money to finance military expenditures.

• It led to competitive currency devaluations and a loss of confidence in the system.

• The price of gold became too stable, hindering economic growth.

• Most countries voluntarily chose to switch to a floating exchange rate system.

What was a defining characteristic of the Bretton Woods System?

• All currencies were freely floating against each other.

• The U.S. dollar was pegged to gold, and other currencies were pegged to the U.S. dollar.

• Competitive devaluations were encouraged to boost exports.

• Gold convertibility was abolished for all currencies.

What is the primary difference in lending practices between the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA)?

• IBRD provides interest-free loans, while IDA provides loans at market rates.

• IBRD focuses on low-income countries, while IDA focuses on middle-income countries.

• IBRD provides loans at market rates to middle-income and creditworthy lower-income countries, while IDA provides interest-free long-term loans to low-income developing countries.

• IBRD provides technical assistance, while IDA provides policy advice.

How is a country's voting power determined within the International Monetary Fund (IMF)?

• It is based on the country's population size.

• It is based on the country's capital subscription, which reflects its economic resources.

• It is determined by a rotating leadership system among member countries.

• It is equally distributed among all member countries, regardless of economic size.