Firms in Thailand that had ________ while the baht was pegged to the dollar faced interest payments that were higher than they had planned once the Thai government abandoned the peg because the baht had been pegged ________ the equilibrium exchange rate for the baht.

Question

Quizplus · Accepted Answer

Firms that borrowed dollars faced higher interest payments because the baht was pegged above the equilibrium exchange rate. When the peg was abandoned, the baht depreciated, making the dollar loans more expensive to repay.

Firms in Thailand That Had ________ While the Baht Was