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3. The international monetary system Until August 1971, industrialized countries around the world maintained a fixed exchange rate of their currencies with the U.S. dollar,

3. The international monetary system

Until August 1971, industrialized countries around the world maintained a fixed exchange rate of their currencies with the U.S. dollar, which was linked to gold. The gold standardized system was called the Bretton Woods Fixed Exchange Rate System. This system collapsed in 1971, and since then, the dollar has not been linked to gold.

Based on your understanding of the international monetary system, complete the following statements:

A SPOT/FORWARD exchange rate is the quoted price for a unit of foreign currency to be delivered at a specified date in the future.

The government sets a PEGGED/FLOATING exchange rate that is allowed to fluctuate only slightly (if at all) around the par value.

When American customers import less from Europe than they export to Europe, the euro DEPRECIATES/APPRECIATES relative to the dollar.

The DEVALUATION/DEPPRECIATION of a currency refers to a decrease or increase, respectively, in the foreign exchange value of a floating currency.

Under a MANAGED/FREEDLY floating regime, supply and demand for the currency determine the exchange rate.

Currencies under such a regime are called HARD/SOFT currencies.

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