Devaluation:
A) refers to an official act to alter an exchange rate.
B) is not required under a system of completely flexible exchange rates.
C) is an alternative to internal adjustment of an economy under fixed exchange rates.
D) all the above.

Question

Quizplus · Accepted Answer

Devaluation refers to an official act by a country to reduce the value of its currency relative to other currencies, which is an alternative to making internal economic adjustments under a fixed exchange rate system. It is not required under a system of completely flexible exchange rates because in such a system, exchange rates are determined by market forces without official intervention.