Overvalued exchange rates were a persistent problem under ISI ...

[j.rubin]

Overvalued exchange rates were a persistent problem under ISI policies. In part, this was a deliberate policy in order to
 
  A) increase imports.
  B) discourage exports.
  C) help targeted industries sell their exports.
  D) help targeted industries buy imports.

Question 2

What are official reserve assets, and why are they important to countries?
 
  What will be an ideal response?

[succesfull]

Answer to Question 1

D

Answer to Question 2

Reserve assets are mainly the currencies of the largest and most stable economies in the world: U.S. dollars, European Union (EU) euros, British pounds, the Japanese yen, and recently the Chinese yuan, as well as monetary gold and SDRs. All forms of international debts can be settled with reserve assets. When a country runs low on reserve assets, it signals that potentially serious problems are arising. In particular, the country may not be able to pay international debts, and it may harm import businesses if the central bank cannot provide a key currency required for payment of import goods.