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Bretton Woods Agreement

Definition

The Bretton Woods Agreement refers to an international monetary agreement that was established in 1944. It aimed to create a stable global economic system after World War II by setting up rules for commercial and financial relations among the major industrial countries.

Analogy

Think of the Bretton Woods Agreement as a "financial constitution" for the world. Just as a constitution sets out the fundamental rules and principles of a country, the Bretton Woods Agreement established the basic framework and regulations for global economic interactions.

Related terms

International Monetary Fund (IMF): An organization created under the Bretton Woods Agreement to promote global monetary cooperation, exchange rate stability, and provide financial assistance to member countries facing economic difficulties.

World Bank: Also established under the Bretton Woods Agreement, it is an international financial institution that provides loans and grants to developing countries for development projects like infrastructure, education, and healthcare.

Gold Standard: A monetary system in which currencies are directly linked to gold. The abandonment of the gold standard was one of the consequences of the Bretton Woods Agreement.