4. Bretton Woods

Suppose that after World War III the United States and Germany agree to peg their currencies to each other under the Bretton Woods system at an exchange rate of $1.00 per mark. Suppose American demand for marks decreases, and the equilibrium dollar price of a mark falls to $0.50 per mark. Which of the following actions could the U.S. government use under Bretton Woods to help eliminate the balanceofpayments imbalance at the pegged exchange rate? 0 Use monetary policy to increase real interest rates in the United States 0 Use dollars to buy German marks in the foreign exchange market 0 Borrow German marks from the IMF and use the marks to buy dollars Which of the following is the reason the Bretton Woods system was ofcially dissolved in 1971? O The International Monetary Fund (IMF) refused to continue supervising the exchange rate practices of member countries. 0 Temporary economic changes in some of the member countries deviated equilibrium exchange rates from targeted rates. 0 The 0.5. suffered growing balancerofipayments deficits. True or False: With either dollarization or currency boards, interest rates must be different from the reserve currency country's prevailing rates. 0 True 0 False