fixed exchange rates

under a system of fixed exchange rates, how can a country try to remedy its balance-of-payments deficit?

Whoa. Where’d you see this one? CFA material has almost nothing on import/export balances in what i’ve seen. All I can think is that a country needs to curb it’s internal level of consumption which is dependent upon foreign imports.

Where did you get this problem? I think this topic has been moved to Level 2.

you’re right

decrease interest rates, foreign investors will take their cash else where were they can earn a higher interest on their funds. (Therefore less borrowing from the home countries point of view)

getterdone Wrote: ------------------------------------------------------- > decrease interest rates, > > foreign investors will take their cash else where > were they can earn a higher interest on their > funds. (Therefore less borrowing from the home > countries point of view) IF YOU LOWER RATES, DOESNT THAT MEAN LESS SAVING AND HIGHER DEMAND FOR $ DOES THIS TIE IN AT ALL TO WHAT THIS QUESTION IS POSING?

Daj think about it this way, you are a Russian investor and you want to make money elsewhere because your homeland IR are poop. Say you have been investing in the US, all of a sudden the slash interest rates. Would you put more dollards into that country? Or would you go to Canada who pays a higher rate of interest?

sorry daj read the question wrong forget what I just wrote lol