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Under the Bretton-Woods adjustable pegged exchange-rate system, member countries were permitted to correct persistent and sizable...

Under the Bretton-Woods adjustable pegged exchange-rate system, member countries were permitted to correct persistent and sizable current account deficits by

a) officially revaluing their currencies.

b) officially devaluing their currencies.

c) allowing their currencies to appreciate in the free market.

d) allowing their currencies to depreciate in the free market.

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Answer #1

Option B.

  • Under the Bretton Woods adjustable pegged exchange rate system, members countries were officially permitted to devalue their currencies.
  • In historic times, the currencies were fixed and pegged to another currency of any another country but they were allowed to be adjusted when the market conditions were worsening.
  • Under Bretton Woods system, currencies were pegged to the price of gold. But the member countries were allowed to devalue their currency when the price of gold rose to correct their persistent and sizable current account deficits.
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