Expected Depreciation Threatens a Peg Because of All the Following

question 113

Multiple Choice

Expected depreciation threatens a peg because of all the following, EXCEPT:

• A) when investors expect the peg to fail it will fail in multiple equilibrium situations.
• B) market sentiment will raise the currency premium and lower confidence.
• C) economic fundamentals are crucial to whether a peg holds or fails.
• D) investor confidence may wane and cause a rise in interest rates.

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Definitions:

Down Payment

An initial upfront payment made when purchasing something expensive, with the balance to be paid over time.

Interest Rate

The percentage of a sum of money charged for its use, indicating the cost of borrowing money or the return on invested funds.

Deposits

Funds placed into an account at a banking institution for safekeeping, which can earn interest over time depending on the type of account.

Investment

Allocating financial resources with the goal of achieving returns or profits.