QUESTION 2 2.5 point There are different policy tools that countries can use to
ID: 2825724 • Letter: Q
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
Sell Treasury Bonds
By selling treasury bonds, the liquidty available in the market is taken by the Treasury thereby reducing the inflation