Author Question: Real GDP per capita is calculated by dividing the value of real GDP for a country by the country's ... (Read 127 times)

waynest · **on:** Jun 29, 2018

Real GDP per capita is calculated by dividing the value of real GDP for a country by the country's adult population.

Indicate whether the statement is true or false

Question 2

South Korea, Indonesia, Malaysia, and Thailand all pegged their currencies to the dollar at one point in time.

Because some of these currencies were overvalued at the pegged rate, speculators anticipated these countries would abandon the peg and speculators began selling those currencies. Explain how this speculation would affect the ability of a country to maintain a pegged exchange rate.

xMRAZ · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

FALSE

Answer to Question 2

As speculators began selling currencies that were pegged to the dollar, this increased the supply of those currencies and increased the demand for the dollar. The result was downward pressure on the prices of currencies pegged to the dollar. However, because these currencies were pegged, the central banks of these countries had to purchase the surplus currency being sold in the foreign exchange markets. To continue purchasing the surplus currency, these countries needed foreign currency (mostly dollars). As reserves of dollars began to fall, it became more difficult for these countries to maintain the peg.