An alternative to maintaining an undervalued 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

An easing of monetary policy decreases domestic interest rates, which decreases the demand for a nation's currency and therefore decreases the fundamental value of the exchange rate.

An Alternative to Maintaining an Undervalued Currency Is to ________