Question

Which system was based on a fixed exchange rate?
A. Bretton wood system
B. political system
C. Military system
D. None of the above

Answer 1

Hint: Fixed exchange rate is an administrative process that is applied by a government or central bank. It ties the nation’s official currency exchange rate to other nations’ currency or even sometimes, the price of gold.

Complete answer: Bretton Woods System was the system that was used to fix the exchange rate, now Bretton Woods defined a system with a set of rules which are unified in nature and also drafted policies which would provide the framework which is necessary to create fixed international exchange rates in terms of money and other forms of currency as well.
Now moreover Bretton Woods established a system of monetary exchange which based on one currency particularly dollar, now it was dollar with which the relation of other currency was established, further this was all convertible to gold for trade.
As a result of it, the articles of agreements of the International Monetary Fund and International Bank for Reconstruction and Development have established which in turn provided a fixed rate of exchange. It was first established among countries like the United States, Canada, Western European Countries, Australia and Japan in 1944.
Therefore, the correct answer is “A”.

Note: The purpose of a fixed exchange rate system is to keep a currency's value within a narrow band. The dollar is the most used currency for transactions in international trade.