Question

Stabilizing an unstable currency or attempting to attract more foreign investment are two reasons why a country might adjust its exchange rate to the U.S. dollar?

1) To increase exports and make domestic goods more competitive
2) To reduce inflation and maintain price stability
3) To encourage tourism and boost the economy
4) To repay foreign debts and improve credit ratings

Answer 1

A country might adjust its exchange rate to the U.S. dollar to increase exports, reduce inflation, and repay foreign debts.

Step-by-step explanation:

There are several reasons why a country might adjust its exchange rate to the U.S. dollar. One reason is to increase exports and make domestic goods more competitive. By adjusting the exchange rate to be weaker, the country's goods become cheaper for foreign buyers, leading to an increase in exports. Another reason is to reduce inflation and maintain price stability. By adjusting the exchange rate to be stronger, it becomes more expensive for foreign buyers to purchase goods from the country, which helps control domestic inflation. Lastly, a country might adjust its exchange rate to repay foreign debts and improve credit ratings. By making the exchange rate stronger, it becomes easier for the country to repay its debts in foreign currency, improving its creditworthiness.