QUESTION 2 2.5 point There are different policy tools that countries can use to

Question

QUESTION 2 2.5 point 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 and simultaneously reduce interest rate Find a policy to devalue the dollar. For instance, implement an expansionary monetary policy. Sell Treasury bonds O Exchange dollars for foreign currencies in the FX market.

Explanation / Answer

Correct option is > Sell the treasury bond

This will help to suck the liquidity and reduce the supply of the money in the market and same shall bring down the inflation rate.

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