In a fixed exchange rate regime, revaluation refers to which description?

In a fixed exchange rate regime, revaluation refers to which description?

• A. An increase in the value of a currency that is set under a fixed exchange rate regime.
• B. A decrease in the value of a currency that is set under a fixed exchange rate regime.
• C. The movement of money for investment across borders.
• D. An increase in the value of a currency that is set under a fixed exchange rate regime.

Answer: (D)

In a fixed exchange rate system, revaluation means the authorities officially raise the pegged value of the domestic currency. It’s an explicit appreciation—the currency is worth more relative to foreign currencies after the revaluation. This is why the central bank often uses foreign reserves to buy domestic currency, reducing its supply and pushing the rate higher. The result is a stronger currency, which tends to make imports cheaper and exports more expensive. This is different from devaluation, which would lower the fixed value. The other options describe unrelated ideas, not an official change in the currency’s fixed value.

In a fixed exchange rate system, revaluation means the authorities officially raise the pegged value of the domestic currency. It’s an explicit appreciation—the currency is worth more relative to foreign currencies after the revaluation. This is why the central bank often uses foreign reserves to buy domestic currency, reducing its supply and pushing the rate higher. The result is a stronger currency, which tends to make imports cheaper and exports more expensive. This is different from devaluation, which would lower the fixed value. The other options describe unrelated ideas, not an official change in the currency’s fixed value.