Which of the following is true of currency crises?
A) They have become less frequent since 1978
B) They are often caused by slow, steady, capital inflows
C) They generally affect nominal exchange rates but not real exchange rates
D) They generally reduce national income
E) By making exports inexpensive and imports costly, they stimulate GDP

Question

Quizplus · Accepted Answer

Currency crises typically lead to a reduction in national income due to the sudden stop in capital flows, depreciation of the national currency, and the subsequent adjustments in the economy. This can lead to a contraction in economic activity, affecting GDP negatively.

Which of the Following Is True of Currency Crises