A country will have a balance-of-payments surplus when its exchange rate:
A)equals the market equilibrium value.
B)is flexible.
C)is overvalued.
D)is undervalued.

Question

Quizplus · Accepted Answer

To maintain an overvalued exchange rate, a nation's government becomes a demander of foreign currency and thereby a supplier of its own currency in the foreign exchange market. This will cause a net increase in a country's stock of international reserves or a balance-of-payments surplus.

A Country Will Have a Balance-Of-Payments Surplus When Its Exchange