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A change in investors' perspectives that makes maintaining a fixed exchange rate untenable is called:a speculative attack.a revaluation.the impossible trinity.a risk premium.

Question

A change in investors' perspectives that makes maintaining a fixed exchange rate untenable is called:a speculative attack.a revaluation.the impossible trinity.a risk premium.

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Solution

A change in investors' perspectives that makes maintaining a fixed exchange rate untenable is called a speculative attack.

Here's why:

  1. A speculative attack in the context of international finance is a situation where traders start selling off a country's currency in anticipation of a future devaluation.

  2. This usually happens when investors believe that a country's central bank does not have enough foreign exchange reserves to maintain the country's fixed exchange rate.

  3. The selling pressure from traders can make it very difficult for a central bank to maintain the fixed exchange rate, leading to a devaluation of the currency.

  4. Therefore, a change in investors' perspectives that makes maintaining a fixed exchange rate untenable is referred to as a speculative attack.

The other terms mentioned - revaluation, the impossible trinity, and risk premium - are related to exchange rates and international finance, but they do not specifically refer to a situation where a change in investors' perspectives makes maintaining a fixed exchange rate untenable.

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Similar Questions

A speculative attack on a fixed exchange rate is likely to occur when:Group of answer choicesa devaluation is expectedthe government imposes capital controlsa revaluation is expectedthe exchange rate is undervalued

The market forces influencing the exchange rate are not fully operational under:Select one:a.Floating exchange rate systemb.Speculative attack on the marketc.Fixed exchange rate systemd.Current regulations of imf

A fixed exchange rate regime(a) forces a country to give up free international flows of capital.(b) forces a country to abandon independent monetary policy(c) can eliminate exchange rate uncertainty(d) is the model used by the U.S. Federal Reserve.

_____ is not a characteristic of speculation.Select one:a.Hedgingb. Risk takingc.Profit motived.Exchange rate fluctuation

When there is unexpected news in the market, the market is more likely to:Become more volatileRemain unchangedShut down

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