In the face of expected depreciation of a fixed exchange rate, the central bank must:

Name: In the face of expected depreciation of a fixed exchange rate, the central bank must:
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Question

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To defend a fixed exchange rate and counteract expected depreciation, a central bank typically raises interest rates. This makes domestic assets more attractive to investors, increasing demand for the currency and helping to maintain its value.

In the Face of Expected Depreciation of a Fixed Exchange