If investors are aware of problems, they launch a ______ attack on the currency and the central bank is forced _____.
A) predatory; to sell the remaining foreign currency reserves
B) speculative; to immediately switch to a floating rate to avoid losing the remaining foreign currency reserves
C) tentative; to build up foreign reserves quickly
D) wholesale; to raise interest rates

Question

Quizplus · Accepted Answer

If investors are aware of problems, they may launch a speculative attack on the currency. In order to avoid losing the remaining foreign currency reserves, the central bank may be forced to immediately switch to a floating rate. This would allow the currency to find its own value in the market instead of the central bank trying to artificially prop it up.

If Investors Are Aware of Problems, They Launch a ______