University of Central Florida (UCF) FIN4243 Debt and Money Markets Practice Exam 3

The Bretton Woods era is recognized for establishing a new international monetary system that was formed in 1944 and lasted until 1971. This system was designed to promote international economic stability by tying currencies to the U.S. dollar, which was, in turn, convertible to gold. The conference held in Bretton Woods, New Hampshire, laid the groundwork for the International Monetary Fund (IMF) and the World Bank, both key institutions in managing international monetary relations.

Between 1944 and 1971, exchange rates were fixed, which significantly reduced volatility in foreign exchange markets and facilitated international trade and investment. However, as economic conditions evolved and pressures mounted on the system, particularly due to the U.S. balance of payments deficits and a rise in dollar holdings globally, the system ultimately collapsed in 1971 when President Nixon announced the suspension of dollar convertibility into gold.

This period is fundamental in the history of international finance, and the years specified accurately capture the timeline during which one of the most significant monetary frameworks in modern history was operational.