A deficit country, like Argentina in 2001, must follow restrictive monetary and fiscal policy in order to maintain a fixed exchange rate.

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When a country is running a deficit, it means that it is spending more than it is generating through exports and other sources of income. In order to maintain a fixed exchange rate, the country must have enough foreign reserves to support it. If the central bank continues to print more money and inject it into the economy, it can lead to inflation and a decrease in the value of the country's currency. This is why a country running a deficit will often follow restrictive monetary and fiscal policy, such as cutting government spending and raising interest rates, in order to maintain a fixed exchange rate. Argentina did pursue such policies in 2001.

A Deficit Country, Like Argentina in 2001, Must Follow Restrictive