As evident from EU nations pegging to the German mark (before currency union) and nations pegging to the U.S. dollar:
A) the mark was overvalued, while the dollar was undervalued.
B) when currency crises occur, they are more severe in emerging markets, yet they can affect both developing and emerging market economies.
C) nations pegging their currencies to the mark had lower rates of interest, yet domestic credit volume was lower in nations pegging to the dollar.
D) currency crises are very uncommon, yet when they occur, the media often makes too much of the issue in their reports.

Question

Quizplus · Accepted Answer

The statement refers to two separate situations where nations chose to peg their currencies to different currencies. It does not provide information about whether the respective currencies were overvalued or undervalued. However, the statement does suggest that currency crises can affect both developing and emerging market economies, indicating that they are not uncommon occurrences. The statement also provides some information about the consequences of currency pegging. Nations pegging their currencies to the mark had lower rates of interest, while domestic credit volume was lower in nations pegging to the dollar.

As Evident from EU Nations Pegging to the German Mark