With fixed exchange rates,central banks must finance trade deficits,allow a devaluation,or else use trade restrictions to restore equilibrium.

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In order to maintain fixed exchange rates, central banks must take one of these actions when there is a trade deficit. They can finance the deficit by selling their own currency and buying foreign currency, allow for a devaluation of their own currency to make exports more competitive, or implement trade restrictions to balance out the economy.

With Fixed Exchange Rates,central Banks Must Finance Trade Deficits,allow a Devaluation,or