Question A developing country that maintains a fixed value for its currency relative to the US dollar is experiencing a decline in its economic activity, and its inflation rate falls below the level of inflation in the United States. The most likely result ...

In the context of implementing fiscal policy, the recognition lag is often referred to as “driving while looking in the rearview mirror.”  

is it necessary for a country who currency is pegged to another currency to mimic the inflation of the foreign currency country

1. When the central bank chooses to target a specific value for its exchange rate: A. it must also target domestic inflation. B. it must also set targets for broad money growth. C. conditions in the domestic economy must adapt ...