One of the Problems Associated with Currency Boards Is That

Multiple Choice

One of the problems associated with currency boards is that if local inflation rates remain higher than the inflation rate in the country to which the currency is pegged than ______.

A) the country's currency can come under attack by speculators
B) the country's interest rates can only be set with the agreement of the country to which the currency is pegged
C) the country's monetary demand may increase faster than monetary supply
D) the country's trade surplus may increase causing trading partners to apply tariffs and other trade barriers
E) the country's currency may become over valued and reduce the country's international competitiveness