[very_short_answer] How did the collapse of the Bretton Woods system of fixed exchange rates in the early 197…

Question

[very_short_answer] How did the collapse of the Bretton Woods system of fixed exchange rates in the early 1970s affect the stability of the global economy and the economic policies of developing countries?

Accepted Answer

## Model Answer The collapse of the Bretton Woods fixed exchange rate system led to floating exchange rates, causing global economic instability. Developing countries could no longer rely on IMF/World Bank loans and were forced to borrow from Western commercial banks. This resulted in periodic **debt crises**, lower incomes, and increased poverty, especially in Africa and Latin America. *Source: Chapter 3, Section 4.4 — End of Bretton Woods and the Beginning of 'Globalisation'* --- ## Explanation - The question is 2 marks, so two clear effects are sufficient — one on global stability (floating rates/instability) and one on developing countries (forced borrowing → debt crises/poverty). - Mention specific regions (Africa, Latin America) to show textbook accuracy — examiners reward this. - Avoid going into MNCs or China; that is beyond what the question asks and wastes words.

Social Science (087) — AI-generated practice question