In the case of a perfectly flexible exchange rate regime, a balance of payments deficit is…
A depreciation of the domestic currency provides the adjustment under a perfectly flexible exchange rate regime. Excess demand for foreign exchange raises its price in…
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In the case of a perfectly flexible exchange rate regime, a balance of payments deficit is automatically corrected by—
Answer and explanation
Correct answer C
A depreciation of the domestic currency provides the adjustment under a perfectly flexible exchange rate regime. Excess demand for foreign exchange raises its price in domestic currency, encouraging exports and discouraging imports.
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Uttarakhand SET (USET)