Under the Bretton Woods system, which outcome occurred regarding the role of the U.S. dollar in international finance?

Under the Bretton Woods system, which outcome occurred regarding the role of the U.S. dollar in international finance?

• A. It was eliminated from international finance
• B. It was floated freely without anchor
• C. It became the global reserve currency
• D. It was pegged to gold forever

Answer: (C)

Under Bretton Woods, exchange rates were fixed with currencies pegged to the U.S. dollar, and the U.S. dollar was pegged to gold at $35 an ounce. This setup made the dollar the central anchor of international finance. Because central banks around the world held dollars as their main reserve asset and used the dollar for most international transactions, the dollar effectively became the global reserve currency. This status persisted until the system dissolved in the early 1970s, when gold convertibility ended and exchange rates moved toward floating; the dollar, however, remained the dominant reserve currency.

Under Bretton Woods, exchange rates were fixed with currencies pegged to the U.S. dollar, and the U.S. dollar was pegged to gold at $35 an ounce. This setup made the dollar the central anchor of international finance. Because central banks around the world held dollars as their main reserve asset and used the dollar for most international transactions, the dollar effectively became the global reserve currency.

This status persisted until the system dissolved in the early 1970s, when gold convertibility ended and exchange rates moved toward floating; the dollar, however, remained the dominant reserve currency.