Under a pegged exchange-rate system,which does not explain why a country would have a balance-of-payments deficit?
A) Very high rates of inflation occur domestically
B) Foreigners discriminate against domestic products
C) Technological advance is superior abroad
D) The domestic currency is undervalued relative to other currencies

Question

Quizplus · Accepted Answer

An undervalued domestic currency would typically lead to a balance-of-payments surplus, not a deficit, as it makes domestic goods cheaper for foreigners, boosting exports.

Under a Pegged Exchange-Rate System,which Does Not Explain Why a Country