lecture ch 11

Question 1

dollarisation

Answer 1

abandoning the current currency and adopting a new currency. this is sometimes used if a country is suffering from severe macroeconomic problems, such as high inflation, that is making its own currency worthless.

Question 2

Bretton Woods Agreement

Answer 2

established two multinational institutions in 1944; the WTO and the IMF. they were committed to not use devaluation as a weapon of competitive trade policy (less than 10% allowed without IMF authorisation). it called for a system of fixed exchange rates policed by the IMF. all countries fixed their currencies to gold, but only the US dollar was convertible.

Question 3

Louvre Accord

Answer 3

pledged to support the stability of exchange rates around their current levels through government intervention in 1987.