Under the IMF fixed exchange rate system, a nation running a balance of payments deficit would have an excess __________ its currency in the foreign exchange market and that nation's central bank would have to __________ some of its currency to maintain the fixed exchange rate.
A) supply of; buy
B) supply of; sell
C) demand for; buy
D) demand for; sell

Question

Quizplus · Accepted Answer

Under the IMF fixed exchange rate system, a nation with a balance of payments deficit would experience an excess supply of its currency in the foreign exchange market. To maintain the fixed exchange rate, the nation's central bank would need to buy some of its own currency, reducing the supply and stabilizing the exchange rate.

Under the IMF Fixed Exchange Rate System, a Nation Running