Under an international regime of fixed exchange rates, countries with a BOP ________ should consider ________ their currency while countries with a BOP ________ should consider ________ their currency.
A) deficit, revaluing; surplus, revaluing
B) deficit, devaluing; surplus, devaluing
C) surplus, devaluing; deficit, revaluing
D) surplus, revaluing; deficit, devaluing

Question

Quizplus · Accepted Answer

Under a fixed exchange rate regime, countries with a balance of payments (BOP) deficit should consider devaluing their currency to make their exports cheaper and imports more expensive, thus improving their BOP. Conversely, countries with a BOP surplus should consider revaluing their currency to make their exports more expensive and imports cheaper, helping to reduce the surplus.

Under an International Regime of Fixed Exchange Rates, Countries with a BOP