Suppose a Country That Has Been Pegging Its Currency Is

question 69

Multiple Choice

Suppose a country that has been pegging its currency is faced with a situation where financial market participants now expect some future revaluation.In such a situation,we would generally expect which of the following to occur?

• A)an increase in the domestic interest rate
• B)an announcement by the central bank that a large revaluation will occur in the near future
• C)an increase in demand for the country's currency
• D)all of the above
• E) none of the above

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Definitions:

Deposit Today

The action of placing money into a financial account or investment with the expectation of receiving future returns.

Savings

Money that is not spent and is set aside for future use, typically in accounts or investments that allow for capital preservation or growth.

Goal

A desired result or outcome that a person or organization envisions, plans, and commits to achieve.

Simple Interest

Interest calculated only on the principal amount, without compounding.