What is a problem in emerging markets that affects a nation's ability to peg its currency?
A) The low level of GDP means the demand for money is always small.
B) The high level of GDP means the demand for money is always large.
C) As the nation develops, the ratio of the demand for money to GDP rises.
D) Because of the volatility of GDP, the demand for money is volatile and the nation must hold higher levels of reserves to peg.

Question

Quizplus · Accepted Answer

The volatility of GDP in emerging markets makes the demand for money more volatile, which makes it difficult for a nation to peg its currency. As a result, the nation must hold higher levels of reserves to stabilize the currency.

What Is a Problem in Emerging Markets That Affects a Nation's