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Paired Passages—Bretton Woods
The idea of a World Bank became a reality in 1944, when delegates to the Bretton Woods Conference pledged to "outlaw practices which are agreed to be harmful to world prosperity."
In 1944, 730 delegates from forty-four Alliednations met in Bretton Woods, New Hampshire, justas World War II was ending. They were attendingan important conference. This mostly forgotten05event shaped our modern world because delegatesat the Bretton Woods Conference agreed on theestablishment of an international banking system.To ensure that all nations would prosper, theUnited States and other allied nations set rules10for a postwar international economy. The BrettonWoods system created the International MonetaryFund (IMF). The IMF was founded as a kind ofglobal central bank from which member countriescould borrow money. The countries needed money15to pay for their war costs. Today, the IMF facilitatesinternational trade by ensuring the stability of theinternational monetary and financial system.The Bretton Woods system also established theWorld Bank. Although the World Bank shares20similarities with the IMF, the two institutions remaindistinct. While the IMF maintains an orderly systemof payments and receipts between nations, the WorldBank is mainly a development institution. The WorldBank initially gave loans to European countries25devastated by World War II, and today it lends moneyand technical assistance specifically to economicprojects in developing countries. For example,the World Bank might provide a low-interest loanto a country attempting to improve education or30health. The goal of the World Bank is to "bridge theeconomic divide between poor and rich countries."In short, the organizations differ in their purposes.The Bank promotes economic and social progress sopeople can live better lives, while the IMF represents35the entire world in its goal to foster global monetarycooperation and financial stability.These two specific accomplishments of theBretton Woods Conference were major. However,the Bretton Woods system particularly benefited40the United States. It established the U.S. dollar asthe global currency. A global currency is one thatcountries worldwide accept for all trade, or interna-tional transactions of buying and selling. Becauseonly the U.S. could print dollars, the United States45became the primary power behind both the IMFand the World Bank. Today, global currenciesinclude the U.S. dollar, the euro (European Unioncountries), and the yen (Japan).The years after Bretton Woods have been consid-50ered the golden age of the U.S. dollar. More impor-tantly, the conference profoundly shaped foreigntrade for decades to come.
The financial system established at the 1944Bretton Woods Conference endured for many55years. Even after the United States abrogatedagreements made at the conference, the nationcontinued to experience a powerful position ininternational trade by having other countries tietheir currencies to the U.S. dollar. The world,60however, is changing.In reality, the Bretton Woods system lasted onlythree decades. Then, in 1971, President RichardNixon introduced a new economic policy. Itmarked the end of the Bretton Woods international65monetary framework, and the action resulted inworldwide financial crisis. Two cornerstones ofBretton Woods, however, endured: the InternationalMonetary Fund (IMF) and the World Bank.Since the collapse of the Bretton Woods system,70IMF members have been trading using a flexibleexchange system. Namely, countries allow theirexchange rates to fluctuate in response to changingconditions. The exchange rate between two curren-cies, such as the Japanese yen and the U.S. dollar,75for example, specifies how much one currency isworth in terms of the other. An exchange rate of120 yen to dollars means that 120 yen are worth thesame as one dollar.Even so, the U.S. dollar has remained the most80widely used money for international trade, andhaving one currency for all trade may be betterthan using a flexible exchange system.This seems to be the thinking of a powerfulgroup of countries. The Group of Twenty (G20),85which has called for a new Bretton Woods, consistsof governments and leaders from 20 of the world'slargest economies including China, the UnitedStates, and the European Union. In 2009, forexample, the G20 announced plans to create a new90global currency to replace the U.S. dollar's role asthe anchor currency. Many believe that China'syuan, quickly climbing the financial ranks, is well onits way to becoming a major world reserve currency.In fact, an earlier 1988 article in The Economist95stated, "30 years from now, Americans, Japanese,Europeans, and people in many other rich coun-tries and some relatively poor ones will probably bepaying for their shopping with the same currency."The article predicted that the world supply of100currency would be set by a new central bank ofthe IMF. This prediction seems to be coming tofruition since the G20 indicated that a "world cur-rency is in waiting." For an international constructsuch as the original Bretton Woods to last some10526 years is nothing less than amazing. But moveover Bretton Woods; a new world order in financecould be on the fast track.
1. Based on Passage 1, it can be reasonably inferred that
2. Which choice provides the best evidence for the answer to the previous question?
3. As used in line 35, "foster" most nearly means
4. Which statement best explains the difference between the purposes of the IMF and the World Bank?
5. Based on the second paragraph in Passage 2, it can be reasonably inferred that
6. Which choice provides the best evidence for the answer to the previous question?
7. As used in line 91, "anchor" most nearly means
8. It can be reasonably inferred from Passage 2 and the graphic that
9. The last paragraph of Passage 2 can be described as
10. Which statement most effectively compares the authors' purposes in both passages?
11. Both passages support which generalization about the global economy?
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