ECON 1010 Lecture Notes - Lecture 1: Bretton Woods System, Monetary Policy, Responsible Government
9 Jan 2019
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Understand what"s happened historically in an economy to appreciate what is happening currently or what might happen in the future. Post-ww2 period: golden age of capitalism. Exchange rates / currency: enable trade between countries. All monies have relative value with each other: fixed exchange rates. Currencies pegged to fixed value (trade based on comparison with a fixed value) Such fixed values include: gold standard (price of gold) Earlier: bretton woods system (us dollars) Can"t just make more coins and bills. Allow for fair trade between countries: floating exchange rates. Currencies allowed to fluctuate in response to currency exchange markets. Investments into the country (traders, investors, banks, etc. ) Government policies: relate to two main government policies: Monetary policy = the setting of interest rates (cost of borrowing money) by banks in order to control inflation. Aim for 2-3% inflation (rise in prices each year)
