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.
Solution
A change in investors' perspectives that makes maintaining a fixed exchange rate untenable is called a speculative attack.
Here's why:
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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.
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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.
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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.
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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.
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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