Countries like Malaysia and Thailand that tried to maintain overvalued currencies in the late 1990s inevitably faced increased

Question

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Countries that try to maintain overvalued currencies are likely to face both runs on their currencies (B) and balance of payments deficits (C). This is because an overvalued currency makes exports less competitive and imports cheaper, leading to a current account deficit and a drain on foreign reserves. As investors lose confidence in the country's ability to maintain the overvalued currency, they may panic and sell off their holdings, leading to a currency crisis and a run on the currency. Therefore, the correct answer is both b and c.

Countries Like Malaysia and Thailand That Tried to Maintain Overvalued