Question

a. What is the History of the IMS, linkage between trade and the gold standard

b. Why did the gold standard fail = what replaced it? Bretton Woods

c. Why did Bretton Woods fail?

d. Managed floating system of the present

e. What is the Eurozone? What is the Euro?

Answer 1

a. The IMS is the International Money System. Right after the 2nd World War, this system was initiated by leaders of 44 countries.

Explanation:

A system that provides international policies regarding currencies and standard rates of exchange. The main aim is to promote international trade. The gold standard was the first standard form of exchange between nations and continents worldwide. This standard helped ease trade; states agreed to put a certain fixed amount of gold as their standard form of exchange across nations.

b. The gold standard was effective until it could not work anymore. This is because the amount of gold being mined had and has not been consistent. It is also a very rare mineral and the processing takes a good amount of time as well. The amount of gold available started reducing and could no longer sustain the global economy. The fact that gold was not always readily available made it an unsuitable form of global exchange. The Bretton Woods monetary system replaced the gold standard system.

c. The Bretton Woods System went down at around 1971. President Richard Nixon decided to end the correlation between gold and the US dollar. The responsibility taken upon the economy of the United States towards the entire world became too much a commitment. Having to keep up with supplying the dollar in relation to gold became overwhelming and people also started demanding to change their cash back into gold. The US gave in and ended the system.

d. The current Managed float regime is the global financial conditions whereby the exchange rates experience daily fluctuations but countries' central banks maintain a certain extent of trade to try leveraging their own rates of exchange.

e. A union of European member states that use the Euro as their customary form of currency and their major legal tender. The Euro is the currency used by European countries as a common form of currency.