Midterm 3 Review
9. What do the Fed’s actions say about the costs and benefits of American
hegemony/leadership in the global economy?
Benefits include funding WWI allies, Marshall plan aid after WWII, and the US pays almost no
interest.
Course Module 21: The United States and the Bretton Woods Organizations
1. According to lecture and the reading (Section 30.2), what is the Bretton Woods
economic order? What were the main forces that served as an impetus for the U.S. to
construct the Bretton Woods order? What are the main organizations that emerged from
Bretton Woods?
Supports and regulates market-based transactions among states. Set up among allied states to
build foundations for global economy after WWII. WTO emerged from Bretton Woods.
2. According to lecture and the reading (Section 30.1), what are the main elements of
international economic cooperation? Why is political cooperation between states on
international economic affairs difficult to achieve?
Joint reduction in tariff barriers. Coordinate interest rates so exchange rates remain the same.
Foreign aid. Political cooperation is difficult to achieve due to future monetary contraction and
cheating and uncertainty of political interests.
3. How might international economic organizations, like the WTO and the IMF,
facilitate economic cooperation among states and higher levels of international trade?
They possess enforcement mechanisms that prevent cheating (states can issue claims against
another state if violating a prior agreement). IMF makes emergency lending packages with
conditions, dispersing in sections and state makes policies that will give IMF confidence they
will be paid back. Membership requires domestic concessions. Forced to share long term
economic interests that allow for less uncertainty. Solve distributional challenges, such as
restraining US.
