Hello, QUESTION 2 2.5 points Save Answer There are different policy tools that c

Question

Hello,

QUESTION 2 2.5 points Save Answer There are different policy tools that countries can use to solve macroeconomic problems. Among those policies is the so-called exchange rate policy. Consider the following case. The United States is experiencing high inflation rate and would like to resort to a policy to reduce the inflation rate. Among the policies listed below, identify the appropriate action that need to be taken. Buy Treasury bonds. Find a policy to devalue the dollar. O Exchange foreign currency reserves for dollars in the FX market. Implement an expansionary monetary policy

Explanation / Answer

2.Find a policy to devalue the dollar.

* By devaluing imports will be cheaper and this will help in reducing inflation.

3.depriciate , increase, increase

* In britian inflation is lower this means interest rate in britian is higher. Higher interest rate will lead to capital inflow in britian and hence demand for pound will increase , supply of dollar will increase and hence dollar will depriciate and hence inflation in US will increase.

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