Please describe in detail a self-fulfilling currency crisis
What will be an ideal response?
Consider an economy in which domestic commercial banks' liabilities are mainly short-term deposits, and in which many of the banks' loans to businesses are likely to go unpaid in the event of a recession. If the market suspects there will be devaluation, interest rates will rise, banks' borrowing costs go up, and a banks' assets have lower value if a recession hits. To prevent financial collapse, the central bank will lend money to banks and no longer be able to keep the exchange rate from rising. Thus, the emergence of devaluation expectations eventually leads to a devaluation of currency (self-fulfilling).
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Consumption smoothing is a logical consequence of ________
A) basing decision-making on real rather than nominal interest rates B) the convexity of indifference curves and the ability to borrow and lend C) the negative slope fo the intertemporal budget constraint D) rational expectations
Monopoly producers face
A) many competitors producing the same product. B) only a few competitors producing the same product. C) at least one competitive producer of the same product. D) no competitive producers of the same product.
Suppose a perfectly competitive firm faces the following cost and revenue conditions: ATC = $25.50; AVC = $20.50; MC = $25.50; MR = $28.50. The firm should
A) decrease output. B) increase output. C) shut down. D) continue to produce its current output.
When a driver enters a crowded highway he increases the travel times of all other drivers on the highway. This is an example of a negative externality
a. True b. False Indicate whether the statement is true or false