Problem
Suppose that a country follows a managed- float policy but that its exchange rate is currently floating freely. In addition, suppose that it currently has a massive current account deficit. Does it also have a balance of payments deficit? If it decides to engage in a currency manipulation in order to reduce the size of its current account deficit, will it buy or sell its own currency? As it does so, what will happen to its official reserves of foreign currencies? Will they get larger or smaller? And, finally, will the country have a balance of payments deficit while it is manipulating the exchange rate?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.