Suppose the policymakers believe their country's currency is undervalued, they should apply a policy of

Question

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If policymakers believe that their country's currency is undervalued, they should apply a policy of revaluation. This involves increasing the value of the currency in relation to other currencies through actions such as increasing interest rates or decreasing the money supply. This can help to reduce inflationary pressures and improve the country's competitiveness in international trade. Overvaluation, devaluation, and depreciation are all policies that involve decreasing the value of the currency, which would not address the issue of undervaluation. The law of one price is a concept related to pricing in international trade, and is not directly related to currency valuation policies.

Suppose the Policymakers Believe Their Country's Currency Is Undervalued, They