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Suppose Argentina follows a fixed exchange rate regime, in which the Argentine peso is pegged to the US dollar. If the Federal Reserve lowers the

Suppose Argentina follows a fixed exchange rate regime, in which the Argentine peso is pegged to the US dollar. If the Federal Reserve lowers the dollar interest rate, the interest rate on Argentine peso will international reserve (in US dollars) of the Central Bank of Argentina will and the assuming no capital controls. fall ; fall

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