To stay with a fixed exchange rate system, a nation that is losing most of its international reserves will have no choice but to
A) ask for or declare a devaluation.
B) ask for or declare a revaluation.
C) let its currency depreciate.
D) let its currency appreciate.

Question

Quizplus · Accepted Answer

If a nation is losing most of its international reserves, it means that there is excessive demand for its currency, leading to a potential currency crisis. To prevent a crisis, the nation may need to devalue its currency to make its exports cheaper and reduce the demand for its currency. Therefore, the only feasible option would be to ask for or declare a devaluation.

To Stay with a Fixed Exchange Rate System, a Nation