How can a country with a fixed nominal exchange rate,such as Greece,experience a lower real exchange rate?
A) by experiencing higher inflation than its partners
B) by experiencing deflation if its partners have low inflation rates
C) by limiting the growth of productivity
D) by increasing wages at a faster rate than inflation

Question

Quizplus · Accepted Answer

A country with a fixed nominal exchange rate can experience a lower real exchange rate through deflation if its partners have low inflation rates. This is because deflation increases the value of the country's currency in real terms, making its goods and services cheaper relative to those of its partners.

How Can a Country with a Fixed Nominal Exchange Rate,such