Suppose That a Nation Has Adopted a Fixed Exchange Rate

question 201

Multiple Choice

Suppose that a nation has adopted a fixed exchange rate with another country, and has a persistent trade deficit.What is most likely to happen?

• A)A gradual increase in the value of its currency
• B)A gradual decrease in the value of its currency
• C)A "run" on its currency and a sudden appreciation
• D)A "run" on its currency and a sudden devaluation

---

Definitions:

Possibilities

Various opportunities or prospects that are available or could be available in the future.

Situation

The set of circumstances and conditions affecting the way in which a task, action, or idea is to be executed or considered.

Risk Averse

a characteristic describing individuals or entities that prefer to avoid risks, often seeking safer or more predictable outcomes.

Women

Female human beings; also refers to gender-based social constructs and roles.