Why Is It Difficult for a Government to Avoid a Currency

question 59

Multiple Choice

Why is it difficult for a government to avoid a currency crisis?

• A)Important companies that have borrowed in foreign currencies can be a powerful lobby in favor of abrupt devaluations of the currency in order to reduce their debts.
• B)Exporters clamor for the government to maintain overvalued exchange rates when the currency should be devalued.
• C)International investors are easily alarmed by any sign of instability and are quick to sell off currency.
• D)In democracies,government officials have to worry about the votes of consumers who would be hurt by overvalued exchange rates.

Examine the relationship between physical gestures or behaviors and emotional states.

Understand the basic emotions and their identification.

Recognize the impact of economic and material conditions on emotional well-being.

Understand the concept and implications of the endowment effect in economic behavior.

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Definitions:

Prime Interest

The interest rate that commercial banks charge their most creditworthy customers, often used as a reference rate for loans.

Float

The time difference between writing a check and the actual withdrawal of funds from the bank account, or in securities trading, it's the number of shares available for trading by the general public.

Fair Value

An estimate of the price at which an asset or liability could be exchanged between knowledgeable, willing parties in an arm's length transaction.

Exit Price

The amount one would earn from selling an asset or the cost to transfer a liability during a well-organized sale between parties in the market.