The oil price shocks of 1973 and 1979 have been largely

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The oil price shocks of 1973 and 1979 have been largely interpreted as detrimental to the US economy, especially for spurting cost inflation. Can you conceive of any way in which the oil price shocks could have been beneficial to the US economy? Think about the role of the dollar as the world currency and about Nixon's decision in 1971 to get rid of the fixed exchange-rate regime of the gold-dollar system. The gold-dollar system prevailed from 1947 up to 1969 with the ounce of gold pegged at 35 dollars, and all other major world currencies were then pegged to the dollar. All major nations had their currencies set at a fixed exchange rate with the American dollar, but the dollar was the only currency convertible into gold. Nixon's unilateral decision brought instability to the international monetary system from 1970 to 1987, when countries then finally engaged in a new worldwide system of floating exchange rates with no gold backing.

Reference no: EM13379521

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