Suppose that after World War II, the United States and France agree to peg their currencies to each other under the Bretton Woods system at an exchange rate of $2 per franc. Suppose American demand for francs increases, and the equilibrium dollar price of a franc rises to $3 per franc. Which of the following actions could the U.S. government use under Bretton Woods to help eliminate the balance-of-payments imbalance at the pegged exchange rate? O Borrow French francs from the IMF and use the francs to buy dollars. Exchange dollars for francs in order to buy gold from France. Decrease U.S. Income taxes,

Suppose that after World War II, the United States and France agree to peg their currencies to each other under the Bretton Woods system at an exchange rate of $2 per franc. Suppose American demand for francs increases, and the equilibrium dollar price of a franc rises to $3 per franc. Which of the following actions could the U.S. government use under Bretton Woods to help eliminate the balance-of-payments imbalance at the pegged exchange rate? O Borrow French francs from the IMF and use the francs to buy dollars. Exchange dollars for francs in order to buy gold from France. Decrease U.S. Income taxes,

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter29: International Finance

Section: Chapter Questions

Problem 8P

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