It has been argued that the exchange rate can be used as a policy tool. Assume that the U.S. government would like to reduce inflation. Which of the following is an appropriate action given this scenario?

Question

Quizplus · Accepted Answer

Buying dollars with foreign currency increases the value of the dollar relative to other currencies. This makes imports cheaper, which can help to reduce inflation by lowering the cost of goods and services in the U.S. market.

It Has Been Argued That the Exchange Rate Can Be