Under a fixed exchange rate regime,if a country has an overvalued exchange rate,then its central bank's attempt to keep its currency from ________ will result in a ________ of international reserves.

Question

Quizplus · Accepted Answer

If a country has an overvalued exchange rate, its central bank will need to sell its own currency and buy foreign currency to maintain the pegged exchange rate. This leads to an outflow of foreign reserves, resulting in a loss of international reserves. Therefore, the answer is B) depreciating; loss.

Under a Fixed Exchange Rate Regime,if a Country Has an Overvalued