To offset a depreciation of the dollar, the Federal Reserve can adopt a restrictive monetary policy that boosts interest rates in the United States relative to those of foreign countries.

Question

Quizplus · Accepted Answer

A restrictive monetary policy, which involves increasing interest rates, can make dollar-denominated financial assets more attractive to investors, thereby increasing demand for the dollar and potentially offsetting its depreciation.

To Offset a Depreciation of the Dollar, the Federal Reserve