Exercise 6 Answer what the following items request:

a. Explain what the Bretton Woods system was and the reasons for its collapse.

b. Even after the end of the Bretton Woods system at the beginning of the 1970s, many Asian and Middle East countries continued tying their currencies to the American dollar.

Give examples of countries that followed this type of exchange rate policy. What are the costs and benefits that these countries enjoyed by maintaining this exchange rate regime?

294 PRINCIPLES OF INTERNATIONAL FINANCE AND OPEN ECONOMY MACROECONOMICS