Final answer:
Special Drawing Rights (SDR) were created by the IMF to provide an international reserve asset to support the liquidity of the global monetary system, reducing reliance on gold and the U.S. dollar.
Step-by-step explanation:
Developed by the IMF to cope with universally floating exchange rates, Special Drawing Rights (SDR) represent an average base of value derived from the value of a group of major currencies. The creation of SDRs was a response to the need for an international reserve asset that could serve as a supplement to existing reserves of gold and U.S. dollars. These units of account, issued by the IMF, aimed to increase the monetary system's liquidity and reduce dependency on gold and the dollar.
The US economy's dominance post-World War II, with its significant portion of the world's gold reserves, allowed for a system in which other currencies were pegged to the U.S. dollar. However, with the end of the gold standard in 1971, the stage was set for a floating exchange rate system where currencies value are based on trust and market perceptions. The concept of floating exchange rates involves allowing the forex market to set exchange rates without direct government intervention—a practice followed by the U.S. dollar and about 40% of the world's economies.