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Which of the following was part of the reason for the European exchange rate crisis of 1992?
Select one:
a. the need for the German mark to appreciate relative to other European currencies
b. the high interest rate in non-German countrie
c. the need to maintain a roughly fixed nominal exchange rate in the face of relatively high
inflation
d. the need for a smaller German budget deficit after German reunification
e. the need for the British pound to be tied to gold
Solution
The need for the German mark to appreciate relative to other European currencies due to high
interest rate in Germany was one of the reason for European echange rate. So option (a) is
correct.

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