Question

Beginning in 1991, Argentina conducted its monetary policy through a currency board. In January 2002, Argentina abandoned the currency board and allowed its currency to float against other currencies. The country took this step because:
A) the Argentine Peso had grown too strong against major trading powers thus the currency board policies were hurting the domestic economy.

B) the United States required the action as a prerequisite to finalizing a free trade zone with all of North, South, and Central America.

C) the Argentine government lost the ability to maintain the pegged relationship as in fact investors and traders perceived a lack of equality between the Argentine Peso and the U.S. dollar.

D) all of the above

Answer 1

Answer:

Correct answer is (C) the Argentine government lost the ability to maintain the pegged relationship as in fact investors and traders perceived a lack of equality between the Argentine Peso and the U.S. dollar.

Explanation:

The country took this step because the Argentina monetary policy was an improper exchange rate and as such the pegged rate failed. That period is refer to as Argentina's currency crisis year as the monetary policy can no longer be sustained.