Once a nation "runs out" of reserves to back the currency, the peg cannot be maintained because:
A) the supply of money grows uncontrollably at the same rate that the central bank monetizes deficits.
B) the central bank cannot raise or lower the supply of money.
C) the IMF will refuse to lend reserves to such a nation.
D) the nation's currency is overvalued so that its exports diminish.

Question

Quizplus · Accepted Answer

The supply of money grows uncontrollably at the same rate that the central bank monetizes deficits.

Once a Nation "Runs Out" of Reserves to Back the Currency