Question

How could a country adjust a disequilibrium in its Balance of Payments in the context of the Bretton Woods System?

Answer 1

In case of Bretton Woods System which was adopted in 1946, the main focus remained on the fixed exchange rate system but in order to overcome the fundamen­tal disequilibrium in the balance of payments, the countries were allowed to perform the devaluation of their currencies by having the permission from IMF. At present, Bretton Woods system is no longer used by the countries and almost all the countries in the have shifted to floated exchange rate system for their currencies and therefore the system of flexible exchange rates is being adopted to find out the various market forces of demand and supply.