[2026] PTE Academic Reading - Multiple Choice, Multiple Answers

The gold standard was a monetary system where a country's currency or paper money had a value directly linked to gold.Under this system, nations agreed to convert paper money into a fixed amount of gold, providing a stable international exchange rate environment.However, the gold standard proved inflexible during times of economic crisis, as it limited a government's ability to adjust the money supply to combat unemployment or recession.Following the turmoil of the Great Depression and World War II, the Bretton Woods Agreement was established in 1944 to create a more flexible framework.This new system pegged major currencies to the United States dollar, which in turn was convertible to gold at a fixed rate.This arrangement allowed for more cooperative international monetary policies and established the International Monetary Fund (IMF) to oversee global trade and finance.The Bretton Woods system aimed to prevent the competitive devaluations that had crippled the global economy in the 1930s.Despite its initial success in fostering post-war reconstruction, the system eventually collapsed in 1971 when the U.S. suspended the dollar's convertibility to gold.This collapse led to the current era of floating exchange rates, where market forces determine the relative values of currencies.