Under the historic adjustable pegged exchange-rate system,member countries were permitted to correct persistent and sizable payment deficits (i.e.,fundamental disequilibrium) by:
A) Officially revaluing their currencies
B) Officially devaluing their currencies
C) Allowing their currencies to depreciate in the free market
D) Allowing their currencies to appreciate in the free market

Question

Quizplus · Accepted Answer

Under the historic adjustable pegged exchange-rate system, member countries were allowed to officially devalue their currencies to correct persistent and sizable payment deficits or fundamental disequilibrium. This meant that the government would reduce the official value of the currency in relation to other currencies, making exports cheaper and imports more expensive, ultimately reducing the trade deficit. Revaluing the currency or allowing it to fluctuate in the free market were also options, but devaluation was the most common approach taken by countries such as the UK in the post-World War II era.

Under the Historic Adjustable Pegged Exchange-Rate System,member Countries Were Permitted