The Bretton Woods system had an Achilles' heel: The system could not work if its key currency,the U.S.dollar,was what?
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 was based on fixed exchange rates, with the US dollar being pegged to gold and other currencies being pegged to the US dollar. However, the system could not work if the US dollar was under speculative attack, as this would cause other countries to lose confidence in the system and seek to exchange their dollar reserves for gold. This eventually happened in the 1970s, leading to the collapse of the Bretton Woods system.

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