Social Science (087) — AI-generated practice question

Lesson 1: Markets alone cannot ensure full employment and stable incomes.

Economists learnt that mass production requires mass consumption, which depends on high and stable incomes. Stable incomes, in turn, require full employment. Since markets alone could not guarantee this, governments needed to intervene to minimise fluctuations in price, output, and employment.

How the Bretton Woods system addressed it: The entire post-war framework was designed to preserve economic stability and full employment in the industrial world, giving governments the tools to manage their economies actively.

Lesson 2: Uncontrolled external flows destabilise economies.

Full employment could only be sustained if governments controlled flows of goods, capital, and labour across borders.

How the institutions addressed it: The IMF was set up to deal with external surpluses and deficits of member nations, while the fixed exchange rate system (currencies pegged to the dollar, dollar pegged to gold at $35/ounce) provided monetary stability, preventing the competitive devaluations and trade disruptions seen in the inter-war period.

Source: Chapter 3, Section 4.1 Post-war Settlement and the Bretton Woods Institutions

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• Examiners expect both lessons clearly named, not just paraphrased — show you know them as distinct points.
• For each lesson, you must link it specifically to IMF or World Bank design; a generic answer loses marks.
• The World Bank's role (post-war reconstruction finance) can be briefly mentioned but the passage emphasises the IMF more for managing external imbalances — stick to what the source says.
• Fixed exchange rates are a key mechanism — mentioning the dollar-gold peg shows depth and earns the extra mark at this level.