Monrovia is a small open economy with a fixed exchange rate for its currency, the Monrovian (M) at M2.00 = US$1.00. Monrovia has been running large and growing trade and current account deficits, in part because the price of its main export (copper) declined and the price of its main import (oil) increased. Monrovia has financed the deficit through external debt (large debt inflows) and depleting its international reserves. As Monrovia approaches a balance of payments crisis, foreign creditos are no longer lending while the Central Bank of Monrovia (CBM) is running out of international reserves. Please mark the only economic policy measure that will not help Monrovia to reduce its current account deficit and avoid a large balance of payments crisis and default on its external debt.

a. Raise interest rates and cut the sources of the current account deficit: a large fiscal deficit and high private consumption and imports

b. Call 1-800-IMF-HELP to borrow reserves from the IMF and implement a tough IMF-designed adjustment program that will reduce domestic absorption (cutting private consumption and the fiscal deficit)

c. Cut interest rates in half and expand the monetary base by 50% to stimulate growth and consumption

d. Devalue the Monrovian by 30% to M2.60 = US$1.00