EC249 Study Guide - Final Guide: International Monetary Fund, Gold Standard, Bretton Woods System
Document Summary
Ec249 chapter 2 internaional monetary system. 2. 1 evoluion of the internaional monetary system: bimetallism before 1875, classical gold standard 1875-1914. 3: breton woods system 1945-1972, flexible exchange rate regime since 1973. A monetary system based on precious metals with coinage maintained for both gold and silver. Bad (abundant) money drives out good (scarce) money. Example: when newly discovered gold was poured into the market, the value of gold became depressed, causing an overvaluaion of gold under the french raio. In order to support unrestricted converibility into gold, banknotes need to be backed by a gold reserve of a minimum stated raio. In addiion, domesic money stock should rise and fall as gold lows into and out of the country: exchange rates are determined by a currencies gold content. Example: xian: c$ = 5 yuan, us$ = 6 yuan, but diference between c$ and us$ is less than that.
