When investors doubt a country's ability to maintain its fixed exchange rate:

Question

Quizplus · Accepted Answer

When investors doubt a country's ability to maintain its fixed exchange rate, it may lead to a speculative attack on the currency, resulting in its devaluation. This is known as a currency crisis, which can be triggered due to various factors such as high inflation, political instability, and balance of payment deficits. The other options, i.e. B and C, are not necessarily true as the exchange rate may not spiral out of control, and lowering interest rates may not always be a viable solution.

When Investors Doubt a Country's Ability to Maintain Its Fixed