Answer to Question #187448 in Macroeconomics for pb jelly

Question

Suppose events in the rest of the world cause the exchange rate to fall when the U.S. economy is at full employment. How should U.S. government react in order to maintain macroeconomic stability? Why?

Answer 1

The U.S. government should conduct a contractionary monetary policy in order to control the money supply and inflation level and maintain macroeconomic stability.