Pegging or fixing the exchange rate at one level usually results in excess demand or excess supply of foreign exchange.

Question

Quizplus · Accepted Answer

Pegging or fixing the exchange rate limits the ability of the currency to adjust to market forces, which can lead to either excess demand or excess supply of foreign exchange, depending on the market conditions. This imbalance in supply and demand can create pressure on the exchange rate and may result in currency crises or other economic problems.

Pegging or Fixing the Exchange Rate at One Level Usually