The government of Never-Never Land, after much deliberation, finally decides to switch to a fixed exchange rate policy. It does this because the value of its currency, the neverback, is so high that the trade deficit is enormous. The finance minister fixes the rate at $$\$ 10$$ a neverback, which is lower than the equilibrium rate of $$\$ 20$$ a neverback.
a. What trade or traditional macro policy options could accomplish this lower exchange rate?
b. Using the laws of supply and demand, show graphically how possible equilibria are reached. $\mathrm{LO} 2$