Because of speculative attacks due to the belief a fixed rate will fail, pegged exchange rates:
A) usually exhibit a long, lingering decline and eventual failure.
B) often collapse suddenly.
C) will be revived as the central bank has a wake-up call from the financial sector.
D) are usually not a good idea in the first place.

Question

Quizplus · Accepted Answer

Pegged exchange rates are vulnerable to speculative attacks, as investors believe that the rate cannot be maintained and will eventually collapse. This leads to sudden and often unpredictable collapses of the exchange rate.

Because of Speculative Attacks Due to the Belief a Fixed