In a fixed exchange rate system, how do countries address the problem of currency market pressures that threaten to lower or raise the value of their currency? A. If demand falls, then countries must increase demand by buying up the excess supply with domestic currency. B. If demand rises, countries must fill the excess demand for foreign currency by selling their reserves. C. If demand rises, then countries can adjust the value of the exchange rate to the desired level. D. A and B only.

Question

Owen Santana

Business

31 May, 10:53

In a fixed exchange rate system, how do countries address the problem of currency market pressures that threaten to lower or raise the value of their currency? A. If demand falls, then countries must increase demand by buying up the excess supply with domestic currency. B. If demand rises, countries must fill the excess demand for foreign currency by selling their reserves. C. If demand rises, then countries can adjust the value of the exchange rate to the desired level. D. A and B only.

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Answers (1)

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Maritza Mcdowell · Answer 1

Answer: D. A and B only

Explanation:

In a fix exchange rate, the country can address problem of currency market pressure that threaten yo lower or raise the value of its currency by this under listed measures;

1. if demand falls, then countries must increase demand by buying up the excess supply with domestic currency

2. if demand rises, countries must fill the excess demand for foreign currency by selling their reserves.