If the target exchange rate of a fixed currency is above the equilibrium exchange rate, to reach the target rate, the government should lower interest rates.

Name: If the target exchange rate of a fixed currency is above the equilibrium exchange rate, to reach the target rate, the government should lower interest rates.
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Question

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Lowering interest rates typically leads to a depreciation of the currency, not an appreciation, which would be needed if the target rate is above the equilibrium rate.

If the Target Exchange Rate of a Fixed Currency Is