If a country has a balance of payments deficit and wishes to maintain the fixed value of its currency, it will generally

Question

Quizplus · Accepted Answer

To maintain the fixed value of its currency in the face of a balance of payments deficit, a country will typically use its foreign reserves to buy its own currency. This action supports the currency's value by reducing its supply in the foreign exchange market.

If a Country Has a Balance of Payments Deficit and Wishes