A ___________ occurs when a speculative attack on the exchange value of a currency results in a sharp depreciation in the value of the currency or forces authorities to expend large volumes of international currency reserved and sharply increase interest rates to defend the prevailing exchange rate.
A) currency crisis
B) monetary disruption
C) banking crisis
D) currency disruption
E) liquidity crisis

Question

Quizplus · Accepted Answer

The description given in the question perfectly fits the definition of a currency crisis. A currency crisis happens when the speculation on the exchange value of a currency leads to a significant decrease in the currency's value or forces the authorities to use a substantial amount of their international currency reserves to maintain the exchange rate.

A ___________ Occurs When a Speculative Attack on the Exchange