If a country finds its fixed rate currency falling,it:

Question

Quizplus · Accepted Answer

If a country's fixed rate currency is falling, it can use its foreign exchange reserves to purchase some of its currency, which will increase demand for the currency and help to maintain the fixed exchange rate. Selling the currency in the market would have the opposite effect, and could lead to further devaluation. Monetary policy can also be used to maintain the exchange rate, but may be less effective in a fixed exchange rate regime. Allowing the currency to devaluate would mean abandoning the fixed exchange rate.

If a Country Finds Its Fixed Rate Currency Falling,it