A currency pegged at a value above the market equilibrium exchange rate is

Question

Quizplus · Accepted Answer

When a currency is pegged at a value above the market equilibrium exchange rate, it means that the pegged value is artificially high, and the currency is overvalued. This implies that the currency is stronger than it should be, which can lead to lower exports and higher imports, resulting in a trade imbalance. Moreover, an overvalued currency can make imports cheaper and lead to higher inflation, making the economy less competitive in the global market.

A Currency Pegged at a Value Above the Market Equilibrium