Q1. [1] medium thorough-understanding
Two statements are given below as Assertion (A) and Reason (R). Choose the correct option.
Assertion (A): The post-war international economic order prioritised stable exchange rates and capital controls over free movement of capital across borders.
Reason (R): Unrestricted capital flows during the inter-war period had destabilised economies and contributed to the Great Depression.
Options:
(A) Both (A) and (R) are true and (R) is the correct explanation of (A).
(B) Both (A) and (R) are true, but (R) is not the correct explanation of (A).
(C) (A) is true, but (R) is false.
(D) (A) is false, but (R) is true.
- A Both (A) and (R) are true and (R) is the correct explanation of (A).
- B Both (A) and (R) are true, but (R) is not the correct explanation of (A).
- C (A) is true, but (R) is false.
- D (A) is false, but (R) is true.
Generated by claude-sonnet-4-6 · 2026-06-26 15:02 · grounding rag
Model Answer
(A) Both (A) and (R) are true and (R) is the correct explanation of (A).
The post-war Bretton Woods system prioritised fixed exchange rates and capital controls because unrestricted capital flows during the inter-war period had caused economic instability and the Great Depression.
Explanation
The textbook (Chapter 3, Section 4.1) clearly states that economists drew lessons from inter-war experiences: governments needed to control flows of goods, capital and labour to ensure full employment and stability. The Bretton Woods system was built on fixed exchange rates precisely because free capital movement had proved destabilising. So (R) directly explains why (A) was adopted — making option (A) correct.