An exchange rate that has an officially fixed value less than its fundamental value is called a(n)____________ exchange rate.

Question

Quizplus · Accepted Answer

An exchange rate that has an officially fixed value less than its fundamental value is called an undervalued exchange rate. This means that the currency is actually worth more than its fixed value, and therefore, it is relatively cheaper for foreigners to buy goods and services denominated in that currency. This can lead to an increase in exports and a decrease in imports, which can help to reduce a country's trade deficit.

An Exchange Rate That Has an Officially Fixed Value Less