It Has Been Argued That the Exchange Rate Can Be

question 102

Multiple Choice

It has been argued that the exchange rate can be used as a policy tool. Assume that the U.S. government would like to reduce inflation. Which of the following is an appropriate action given this scenario?

• A) Sell dollars for foreign currency
• B) Buy dollars with foreign currency
• C) Lower interest rates
• D) None of the above

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Definitions:

State Law

The body of law that is created by and specific to the individual states in a country, as opposed to federal law which is applicable across the entire country.

Interstate Agreements

Contracts or treaties between two or more states within a federation like the United States, often requiring federal approval.

Intrastate Agreements

Agreements or contracts that occur within the same state, subject to the state's laws and not impacting interstate commerce.

Chicago School

An economic viewpoint emphasizing free-market principles and the reduction of government involvement in the economy, especially noted for its influence in antitrust law.