Suppose a country with a fixed exchange rate decides to decrease the price of its currency. This change in policy is called:
A) a revaluation.
B) a peg.
C) a depreciation.
D) a devaluation.
E) an appreciation.

Question

Quizplus · Accepted Answer

A decrease in the price of a country's currency is known as a devaluation. A revaluation is when the value of the currency is increased, while peg refers to fixing the exchange rate of a currency to that of another currency or a basket of currencies. Depreciation refers to the decrease in the value of a currency in a floating exchange rate system, and appreciation refers to an increase in the value of a currency in a floating exchange rate system.

Suppose a Country with a Fixed Exchange Rate Decides to Decrease