Under a fixed exchange rate system,countries that ran large,persistent balance of payments deficits would ________ international reserves,thereby pressuring them into ________ their exchange rate.

Question

Quizplus · Accepted Answer

Under a fixed exchange rate system, countries with persistent balance of payments deficits would lose their international reserves, as they would need to use their reserves to maintain their fixed exchange rate. This would eventually put pressure on them to devalue their currency and lower the exchange rate. Therefore, the correct answer is C.

Under a Fixed Exchange Rate System,countries That Ran Large,persistent Balance