Which of the following is an example of a pegged currency?
(A) U.S. dollar British pound
© Euro
(D) Chinese yuan
(B) Listen

Imagine a sunny afternoon in Hong Kong where the Hong Kong dollar is pegged to the U.S. dollar! This means that the exchange rate between the two currencies stays stable at a fixed rate, creating an easier environment for trade and investment. The Hong Kong Monetary Authority ensures this stability, which helps facilitate economic growth and investor confidence.

Now, let’s think about the practical side of it. Pegged currencies can protect smaller economies from extreme volatility, but they also come with risks. If the value of the pegged currency changes dramatically or if the country doesn’t have enough foreign reserves to maintain that peg, it can lead to serious economic troubles. Making sure to manage this balancing act is crucial for economic stability!