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a) Speculators are likely to attack the foreign exchange market if country maintains   (select one)  fixed exchange...

a) Speculators are likely to attack the foreign exchange market if country maintains  

(select one)  fixed exchange rate and domestic currency is overvalued , fixed exchange rate and domestic currency is undervalued , floating exchange rate regime  .

b) The speculator attack will shift the  

(select one)  supply for domestic currency to the right and government will have to buy domestic currency ,

supply for domestic currency to the right and government will have to sell domestic currency ,

supply for domestic currency to the left and government will have to buy domestic currency ,

supply for domestic currency to the left and government will have to sell domestic currency ,

demand for domestic currency to the right and government will have to buy domestic currency ,

demand for domestic currency to the right and government will have to sell domestic currency ,

demand for domestic currency to the left and government will have to buy domestic currency ,

demand for domestic currency to the left and government will have to sell domestic currency .

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Answer #1

fixed exchange rate and domestic currency is overvalued
(Under a fixed exchange rate when a domestic currency is overvalued then speculators attack the currency)

supply for domestic currency to the right and government will have to sell domestic currency
(The speculative attack means that speculators will suddenly sell domestic currencies in large amount. This will increase the supply of domestic currency so the government will have to buy domestic currency to maintain the fixed exchange rate)

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