Question

As a result of Bretton Woods and the dollar's use as a proxy for gold, the United States ran up a balance-of-payments deficit of around $56 billion, which led to the United States going off the gold exchange standard in 1971. What was the reason behind the United States going off the gold exchange standard in 1971?

1) The United States wanted to have more control over its monetary policy.
2) The United States wanted to reduce its balance-of-payments deficit.
3) The United States wanted to increase its gold reserves.
4) The United States wanted to align its currency with other major currencies.

Answer 1

The United States went off the gold exchange standard in 1971 primarily because it wanted more control over its monetary policy.

Step-by-step explanation:

The reason behind the United States going off the gold exchange standard in 1971 was primarily because the United States wanted to have more control over its monetary policy.

By allowing the dollar to flow freely against the price of gold, it caused a devaluation of the dollar, which made American goods cheaper abroad and stimulated exports, ultimately addressing the balance-of-payments deficit. This move marked the beginning of the end of the dollar's dominance in international trade.