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It Has Proven to Be Difficult for a Country to Maintain

Question 29

Multiple Choice

It has proven to be difficult for a country to maintain a fixed exchange rate with today's high degree of capital mobility because

A) foreign exchange speculators can buy so much of the country's currency that the country will run out of the foreign currency that it needs to sell to purchase its own currency.
B) foreign exchange speculators always try to force a country's currency to depreciate.
C) foreign exchange speculators can sell so much of the country's currency that the country will run out of the foreign currency that it needs to sell to purchase its own currency.
D) foreign exchange speculators always try to force a country's currency to appreciate.

Correct Answer: