-It is clear from the diagram above that,under fixed exchange rates
A) Germany has a balance-of-payments deficit and its currency is overvalued.
B) Germany has a balance-of-payments surplus and its currency is overvalued.
C) the United States has a balance-of-payments deficit and its currency is overvalued.
D) the United States has a balance-of-payments surplus and its currency is overvalued.
E) the United States must be giving up resources to purchase an excess supply of euros.

Question

-It is clear from the diagram above that,under fixed exchange rates
A) Germany has a balance-of-payments deficit and its currency is overvalued. 
B) Germany has a balance-of-payments surplus and its currency is overvalued. 
C) the United States has a balance-of-payments deficit and its currency is overvalued. 
D) the United States has a balance-of-payments surplus and its currency is overvalued. 
E) the United States must be giving up resources to purchase an excess supply of euros.

Quizplus · Accepted Answer

Germany has a balance-of-payments deficit because its currency is overvalued. This means that the value of the German mark is higher than it should be, making German goods more expensive for foreigners to buy and foreign goods cheaper for Germans to buy. This leads to a deficit in Germany's balance of payments.

-It Is Clear from the Diagram Above That,under Fixed Exchange