A Country That Uses a Fixed Exchange Rate to Undervalue

question 61

Multiple Choice

A country that uses a fixed exchange rate to undervalue its currency will:

• A) increase its exports.
• B) encourage capital flow to foreign countries.
• C) increase the price of imports for domestic consumers.
• D) All of these are true.

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Definitions:

Permanent Accounts

Accounts that carry their ending balances over into the next accounting period and are not closed out, such as assets, liabilities, and equity accounts.

Balance Sheet

A document depicting a corporation’s financial standing at a particular instant, outlining its assets, debts, and owner's equity.

Real Accounts

Accounts that are not closed at the end of the accounting year and include all balance sheet accounts that show the real and permanent financial position of a business.

Permanent Accounts

Accounts that carry their ending balances over to the next fiscal year, including asset, liability, and equity accounts, foundational for understanding a company's financial health.