Suppose a Country That Has Been Pegging Its Currency Is

question 29

Multiple Choice

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

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

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Definitions:

Average Daily Receipts

The average amount of cash received by a business on a daily basis, calculated over a specific period of time.

Collection Delay

The lag between the time when a payment is made by a customer and when the funds are actually available for use by the recipient.

Average Daily Float

The average amount of time it takes for checks or other transactions to clear and be reflected in the available balance of an account.

Collection Delay

The period between when a sale is made and when the payment is actually received.