Without currency devaluation, a country in "fundamental disequilibrium" would experience:
A)a persistent trade surplus.
B)a balance-of-payments equilibrium.
C)an increase in exports.
D)high unemployment.
E)deflation.

Question

Quizplus · Accepted Answer

The system of adjustable parities allowed for the devaluation of a country's currency by more than 10 percent if the International Monetary Fund (IMF) agreed that a country's balance of payments was in "fundamental disequilibrium." The term fundamental disequilibrium was not defined in the IMF's Articles of Agreement, but it was intended to apply to countries that had suffered permanent adverse shifts in the demand for their products. Without devaluation, such a country would experience high unemployment and a persistent trade deficit until the domestic price level had fallen far enough to restore a balance-of-payments equilibrium.

Without Currency Devaluation, a Country in "Fundamental Disequilibrium" Would Experience