When a currency is overvalued,international reserves __________ and the country has a balance-of-payments ___________.

Question

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When a currency is overvalued, it is more expensive compared to other currencies. As a result, exports become less competitive, which reduces the demand for the country's goods and services, and the country's international reserves decrease. This is because fewer foreign currencies are being earned through exports. At the same time, imports become cheaper, and the demand for foreign goods and services increases, leading to a deficit in the balance of payments. Therefore, when a currency is overvalued, international reserves decrease, and the country has a balance-of-payments deficit.

When a Currency Is Overvalued,international Reserves __________ and the Country