d) What policy would help the developing country maintain its fixed exchange rate? O An increase in interest rates in the United StatesO U.S. consumer expectations that future prices will increase in the developing nationO Increased preferences of new dollar holders for U.S. goods and servicesO An increase in income among those holding new dollarsb. If exchange rates are flexible, how does the change in demand affect the value of new dollars?O New dollars depreciate relative to the U.S. dollar.O New dollars appreciate relative to the U.S. dollar.Suppose the developing country has decided to peg its currency (new dollar) to the U.S. dollar at exchange rate ee.c. With the new demand for new dollars, how must the developing nation adjust the market to maintain the fixed exchange rate?O Decrease the supply of new dollarsO Increase the supply of new dollarsO Increase the demand for new dollarsd. What policy(s) would help the developing country maintain its fixed exchange rate?Instructions: In order to receive full credit, you must make a selection for each option. For correct answer(s), click the box once toplace a check mark. For incorrect answer(s), click the option twice to empty the box.Enact contractionary monetary policy? Purchase foreign reserves with new dollars? Enact expansionary monetary policy? Purchase new dollars with foreign reserves In examining the market for new dollars, a currency used in a developing country, you notice an increase in demand for new dollarsrelative to U.S. dollars. The demand for new dollars increases from D to D1New DollarsScesD,Q1Quantity (new dollars)a. Which of the following events likely caused the increase in demand for new dollars?< Prev9 of 13Next >nere to searchExchange Rate (USD/new dollar)出

Countries often take monetary policy measures to maintain their exchange rate system. A developing…

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What policy would help the developing country maintain its fixed exchange rate?

Microeconomics

13th Edition

ISBN:9781337617406

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter21: International Finance

Section: Chapter Questions

Problem 3QP

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