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Scenario: Suppose India borrows $10,000 from the United States at the beginning of 2016. The ...

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Scenario: Suppose India borrows $10,000 from the United States at the beginning of 2016. The ...

Scenario: Suppose India borrows $10,000 from the United States at the beginning of 2016. The flexible exchange rate is 50 Indian rupees per dollar.

Refer to the scenario above. Assuming that the loan is contracted in dollars, If India wants to repay a lower sum of rupees to the United States, it should ________.

▸ depreciate the rupee

▸ appreciate the rupee

▸ continue to use a flexible exchange rate regime

▸ peg the exchange rate to 70 rupees per dollar

Textbook

Macroeconomics

Edition: 3^rd

Authors: Acemoglu, Laibson, List

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