If a currency's exchange rate is undervalued, a government would likely initiate actions to devalue the currency.

Question

Quizplus · Accepted Answer

If a currency's exchange rate is undervalued, a government would actually initiate actions to strengthen the currency, not devalue it further. This would make exports more expensive, but imports cheaper and more competitive, which could help increase domestic production and reduce the trade deficit.

If a Currency's Exchange Rate Is Undervalued, a Government Would