Supporters of fixed exchange rates maintain that such a rate removes uncertainty about the future exchange rate,creating a better business environment for exporters and importers.However,a speculative attack on a currency with a fixed exchange rate may lead to __________ of the currency.

Question

Quizplus · Accepted Answer

A speculative attack on a currency with a fixed exchange rate may lead to a sudden, unpredictable devaluation of the currency. This is because investors may sell off the currency in large volumes, causing its value to drop rapidly. This can create chaos in the market and make it difficult for importers and exporters to plan and conduct their business.

Supporters of Fixed Exchange Rates Maintain That Such a Rate