what is the difference between bretton woods agreement and system
Answers
The Bretton Woods system was a remarkable achievement of global coordination. It established the U.S. dollar as the global currency, taking the world off of the gold standard. It created the World Bank and the International Monetary Fund. These two global organizations would monitor the new system.
Bretton Woods established America as the dominant power behind these two organizations and the world economy.
That's because it replaced the gold standard with the U.S. dollar. After the agreement was signed, America was the only country with the ability to print dollars.
The Bretton Woods agreement was created in a 1944 conference of all of the World War II Allied nations. It took place in Bretton Woods, New Hampshire. Under the agreement, countries promised that their central banks would maintain fixed exchange rates between their currencies and the dollar. How exactly would they do this? If a country's currency value became too weak relative to the dollar, the bank would buy up its currency in foreign exchange markets. That would decrease the supply, which would raise the price. If its currency became too high, the bank would print more. That would increase the supply and lower its price.
Members of the Bretton Woods system agreed to avoid any trade warfare. For example, they wouldn't lower their currencies strictly to increase trade.
But they could regulate their currencies under certain conditions. For example, they could take action if foreign direct investment began to destabilize their economies. They could also adjust their currency values to rebuild after a war.
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