Exhibit 16.1
At the Plaza Accord of 1985,the Group-of-Five nations agreed to drive the value of the dollar downward (i.e.,depreciation) so as to help reduce the U.S.trade deficit.Answer the following question(s) on the basis of this information.
-Refer to Exhibit 16.1.To help drive the dollar's exchange value downward,the Federal Reserve would:
A) Reduce taxes
B) Increase taxes
C) Decrease the money supply
D) Increase the money supply

Question

Exhibit 16.1 
At the Plaza Accord of 1985,the Group-of-Five nations agreed to drive the value of the dollar downward (i.e.,depreciation) so as to help reduce the U.S.trade deficit.Answer the following question(s) on the basis of this information.
-Refer to Exhibit 16.1.To help drive the dollar's exchange value downward,the Federal Reserve would:
A) Reduce taxes
B) Increase taxes
C) Decrease the money supply
D) Increase the money supply

Quizplus · Accepted Answer

To drive the value of the dollar downward, the Federal Reserve would likely increase the money supply, as this would lead to lower interest rates and make U.S. exports more competitive by making them cheaper in foreign markets. A decrease in the money supply would likely lead to higher interest rates and a stronger dollar, which would not achieve the desired result of reducing the trade deficit.

Exhibit 16.1 at the Plaza Accord of 1985,the Group-Of-Five Nations Agreed to Nations