Under a System of Fixed Exchange Rates,if the Exchange Rate

question 130

Multiple Choice

Under a system of fixed exchange rates,if the exchange rate of a country is undervalued,then its central bank's effort to prevent the currency from ______ will lead to a (an) ______.

• A) depreciating; increase in international reserves
• B) depreciating; decrease in international reserves
• C) appreciating; increase in international reserves
• D) appreciating; decrease in international reserves

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Definitions:

Discount

A reduction in the price of goods or services, often used as a strategy to increase sales or clear inventory.

Purchases

The total amount of goods bought by a business for resale or production during an accounting period.

Gallon

A unit of volume for liquid measure in the United States, equal to 3.785 liters.

Gas

A state of matter characterized by high compressibility and expansion to fill any container, often used as a fuel.