If Mexico wants to fix the peso to the U.S.dollar in the short run,

Question

Quizplus · Accepted Answer

If Mexico wants to fix the peso to the U.S. dollar in the short run it must echo the U.S. monetary policy and adjust its interest rates by the same amount as changes in the federal funds rate. This means that options A and B are required. Option C is not necessary as it only applies to long-term exchange rate stability, not short-term stability. Option D is not true as many countries have maintained fixed exchange rates, although it can be difficult to do so in the long run. Therefore, the best choice is E.

If Mexico Wants to Fix the Peso to the U