Differentiate between the process of defending an undervalued currency and an overvalued currency?
What will be an ideal response?
If a currency is undervalued against a foreign currency, the quantity supplied of the foreign currency exceeds the quantity demanded of the foreign currency. Hence, to defend the currency, the domestic government has to buy the foreign currency and sell the domestic currency. On the other hand, if a currency is overvalued against a foreign currency, the quantity demanded of the foreign currency exceeds the quantity supplied of the foreign currency. Hence, to defend the currency, the domestic government has to sell the foreign currency and buy the domestic currency.
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In 1992, Britain and Italy __________ the European Monetary System and __________ against the other major European currencies
A) joined; fixed their currency B) joined; let their currency float C) left; fixed their currency D) left; let their currency float
Refer to the information provided in Figure 2.5 below to answer the question(s) that follow. Figure 2.5Refer to Figure 2.5. For this economy to move from Point C to Point B, ________ additional LCD TVs could be produced when the production of OLED TVs is reduced by 20.
A. exactly 30 B. exactly 60 C. fewer than 30 D. more than 30