Suppose policy makers in a fixed exchange rate regime decide to peg the exchange rate at a lower level. Such a policy is called:
A) a misalignment.
B) a depreciation.
C) a revaluation.
D) an appreciation.
E) a devaluation.

Question

Quizplus · Accepted Answer

When policy makers in a fixed exchange rate regime decide to peg the exchange rate at a lower level, it is called a devaluation. This involves reducing the value of the domestic currency in relation to other currencies.

Suppose Policy Makers in a Fixed Exchange Rate Regime Decide