Under a system of fixed exchange rates,if the international reserves of a country's central bank become exhausted,it can no longer prevent its currency from
A) undergoing price inflation
B) undergoing price deflation
C) appreciating
D) depreciating

Question

Quizplus · Accepted Answer

If a country's central bank runs out of international reserves under a fixed exchange rate system, it will not be able to sell its currency in the foreign exchange market to maintain its value. This will result in a depreciation of the country's currency as supply exceeds demand in the foreign exchange market. Hence, the correct choice is D) depreciating.

Under a System of Fixed Exchange Rates,if the International Reserves