Under a flexible exchange rate system,a decline in the value of a currency relative to other currencies is a called a(n)____________ and,under a fixed exchange rate system,a decrease in the official value of a currency is called a(n)___________.

Question

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Under a flexible exchange rate system, the decline in the value of a currency relative to other currencies is called a depreciation. On the other hand, under a fixed exchange rate system, a decrease in the official value of a currency is called a devaluation. Therefore, the best choice is A, where depreciation refers to a decline in the value of a currency, and devaluation refers to a decrease in the official value of a currency.

Under a Flexible Exchange Rate System,a Decline in the Value