The 'destabilising speculation' that followed the Thai government's attempt to peg its currency to the US dollar resulted in Thailand abandoning its peg.The result was a(n):
A) appreciation of the baht relative to the US dollar and higher interest costs on dollar-denominated loans.
B) appreciation of the baht relative to the US dollar and lower interest costs on dollar-denominated loans.
C) depreciation of the baht relative to the US dollar and higher interest costs on dollar-denominated loans.
D) depreciation of the baht relative to the US dollar and lower interest costs on dollar-denominated loans.

Question

Quizplus · Accepted Answer

The destabilising speculation caused a depreciation of the baht relative to the US dollar, which led to Thailand abandoning its peg. As a result, higher interest costs on dollar-denominated loans would occur because the baht is weaker compared to the US dollar. Therefore, the correct answer is C - depreciation of the baht relative to the US dollar and higher interest costs on dollar-denominated loans.

The 'Destabilising Speculation' That Followed the Thai Government's Attempt to Peg