It Has Been Argued That the Exchange Rate Can Be

question 53

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

---

Definitions:

Wine Barrels

Containers traditionally made of oak wood, used for aging and storing wine to enhance its flavor and quality.

Exhaustible Resource

A natural resource that has a finite supply and can be depleted by human activities, such as fossil fuels or minerals.

User Cost

The opportunity cost of using a durable good, which includes depreciation and the foregone interest on the funds tied up in owning the good.

Market Rate

The prevailing price or interest rate for goods, services, or securities in a competitive marketplace.