The Bretton Woods system had an Achilles' heel: The system could not work if its key currency, the U.S.dollar, was
A)overvalued.
B)undervalued.
C)under speculative attack.
D)subject to a high U.S.inflation rate.
E)not based on the gold standard

Question

Quizplus · Accepted Answer

The Bretton Woods system relied on the U.S. dollar being pegged to gold at a fixed rate, which meant that other countries could exchange their dollars for gold at any time. If there was a speculative attack on the U.S. dollar, meaning many people and countries wanted to exchange their dollars for gold at the same time, the U.S. might not have enough gold reserves to honor all the requests. This could lead to the collapse of the Bretton Woods system.

The Bretton Woods System Had an Achilles' Heel: the System