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Rick Politician 873454/27/2007 I BUS 300 Chapter 9 Homework b. A popular government approach to dealing with currency deflation is for a troubled country's central bank raise interest rates and to purchase the country's native currency from the world market with currencies of other nations that the central bank had been storing in reserves. This government intervention holds a currency at a higher exchange rate. The negative effects are that as the native currency's exchange rate drops, the central banks reserves become depleted. Also, the higher interest rates further the costs of debtors. Another means the government uses to halt dropping currency values is to nationalize the larger companies that are failing. This has the benefits of keeping workers employed and exports at their usual levels. Although, nationalizing companies puts a greater strain on a governments finances and reduces the productivity of that company. Furthermore, seeing the government as less stable, foreign and domestic investors will be less likely to invest in the troubled country.