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

Question

Quizplus · Accepted Answer

When policy makers in a fixed exchange rate regime decide to peg the exchange rate at a higher level, it is called a revaluation. A revaluation is an official increase in the value of a country's currency relative to other currencies under a fixed exchange rate regime. This is done to increase the purchasing power of the currency and make imports cheaper, but it can also make exports more expensive and hurt trade competitiveness.

Assume Policy Makers in a Fixed Exchange Rate Regime Decide