When the external purchasing power or a currency is greater than the internal purchasing power,the currency is said to be ________.

Question

Quizplus · Accepted Answer

When the external purchasing power of a currency is greater than the internal purchasing power, it means that the currency is overvalued. This means that its exchange rate is higher than what it should be based on its economic fundamentals. This could lead to a situation where imports become cheaper, while exports become more expensive, which can negatively affect a country's trade balance.

When the External Purchasing Power or a Currency Is Greater