Under a Fixed Exchange Rate Regime,if a Country Has an Undervalued

question 31

Multiple Choice

Under a fixed exchange rate regime,if a country has an undervalued exchange rate,then its central bank's attempt to keep its currency from ________ will result in a ________ of international reserves.

• A)depreciating;gain
• B)depreciating;loss
• C)appreciating;gain
• D)appreciating;loss

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Definitions:

Price Level

The ongoing average price for the economy's produced goods and services.

Consumer Price Index

An indicator that calculates the weighted mean of the cost of a collection of consumer products and services, including transportation, food, and healthcare, employed to gauge inflation rates.

Inflation Rate

The enhancement of the overall price tag of goods and services in an economy throughout a specific period.

Consumer Price Index

A statistical estimate that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care, calculated by taking price changes for each item in the predetermined basket of goods and averaging them.