Currency crises may result from
A) central bank balance sheets with higher liabilities than assets.
B) political upheaval leading to lowering exports.
C) a reconfiguration of central bank balance sheets.
D) speculative attacks on the currency or central banks purchasing excessive amounts of government bonds.
E) depreciation of foreign reserves.

Question

Quizplus · Accepted Answer

Currency crises can result from speculative attacks on the currency, where investors sell off the currency in anticipation of a decline in its value. Additionally, when central banks purchase excessive amounts of government bonds to inject liquidity into the economy, it can lead to inflation and a decrease in the value of the currency, causing a currency crisis.

Currency Crises May Result from