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What policy remedies, if any, are available to countries with overly strong currencies?

What policy remedies, if any, are available to countries with overly strong currencies?

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Answer #1

Overly strong currencies results into fall in domestic demand and rise in imports. It leads to problem of trade deficit. Further, strong currency leads to inflation. Inflation discourages export.

Overly strong currency does not create problem during the boom period but during recession, overly strong currency can create problem in form of reduced demand for domestic products.

Government must increase taxes and reduce spending to discourage spike in imports.

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