An alternative to maintaining an overvalued currency is to ________ the fundamental value of the exchange rate by ________ monetary policy.
A)increase; tightening
B)increase; easing
C)decrease; tightening
D)decrease; easing

Question

Quizplus · Accepted Answer

A tightening of monetary policy increases domestic interest rates, which increases the demand for a nation's currency and therefore increases the fundamental value of the exchange rate.

An Alternative to Maintaining an Overvalued Currency Is to ________