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The Republic of Gizmovia wants to maintain the exchange rate of its currency,the gizmo,at $0.50,but the current exchange rate for the gizmo is $0.40.
-(Scenario: Gizmovia)Refer to Scenario: Gizmovia.If Gizmovia uses monetary policy to bring the exchange rate for the gizmo to $0.50,it should _____ interest rates,which will _____ capital outflows of gizmos.

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If Gizmovia wants to maintain the exchange rate of its currency, it can increase interest rates to encourage foreign investors to invest in the country which will lead to a decrease in capital outflows of gizmos. This will increase the demand for the gizmo and consequently its exchange rate, bringing it closer to the desired level of $0.50. Therefore, option D (increase;decrease) is the correct answer.

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