Consider a Country That Is Operating Under a Fixed Exchange-Rate

question 57

Multiple Choice

Consider a country that is operating under a fixed exchange-rate system.The country's balance of payments will always show total debits equal to total credits because

• A)fluctuations in exchange rates will bring debits and credits into equality.
• B)any official financing required to maintain the fixed exchange rate will offset any deficit or surplus in the rest of the balance of payments accounts.
• C)short-term capital flows will always offset any deficit or surplus in current accounts and long-term capital accounts.
• D)the official financing account will always offset a deficit or surplus in the current account.
• E)fluctuations in interest rates will bring debits and credits into equality.

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