Under a system of fixed exchange rates,if the exchange rate of a country is overvalued,then its central bank's effort to prevent the currency from ______ will lead to a (an) ______.
A) depreciating; increase in international reserves
B) depreciating; decrease in international reserves
C) appreciating; increase in international reserves
D) appreciating; decrease in international reserves

Question

Quizplus · Accepted Answer

If a currency is overvalued under a fixed exchange rate system, the central bank must sell foreign reserves to buy its own currency to maintain the fixed rate, leading to a decrease in international reserves.

Under a System of Fixed Exchange Rates,if the Exchange Rate