- CFA Exams
- CFA Level I Exam
- Study Session 5. Economics (2)
- Reading 18. Currency Exchange Rates
- Subject 6. Exchange Rates, International Trade, and Capital Flows
CFA Practice Question
Under a system of fixed exchange rates, an upward revaluation of a nation's currency would ______
A. tend to cause an increase in exports.
B. tend to cause an increase in imports.
C. not be permitted.
Explanation: The higher value of the domestic currency would make foreign goods and services less expensive and would increase imports. Under fixed-rate systems, changes are made by the governing authority rather than taking place freely in markets.
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