Typically, an exchange rate crisis can be caused by:
A) a government default on debt.
B) a banking crisis, triggered by adverse shocks.
C) sudden infusion of credit into the economy.
D) a government default on debt and a banking crisis, triggered by adverse shocks.

Question

Quizplus · Accepted Answer

An exchange rate crisis can indeed be caused by both a government default on debt and a banking crisis triggered by adverse shocks. These events undermine confidence in a country's financial stability, potentially leading to rapid depreciation of its currency.

Typically, an Exchange Rate Crisis Can Be Caused By