Read the following Passage and Answer the questions given below:

Widespread currency manipulation, mainly in developing and newly industrialized economies, is the most important development of the past decade in international financial markets. In an attempt to hold-down the values of their currencies, governments are distorting capital flows by around $1.5 trillion per year. The result is a net drain on aggregate demand in the United States and the Euro area by an amount roughly equal to the large output gaps in the United States and the Euro area. In other words, millions more Americans and Europeans would be employed if other countries did not manipulate their currencies and instead achieved sustainable growth through higher domestic demand.

The United States has lost 1 million to 5 million jobs due to this foreign currency manipulation. More than 20 countries have increased their aggregate foreign exchange reserves and other official foreign assets by an annual average of nearly $1. 5 trillion in recent years. This build-up of official assets-mainly through intervention in the foreign exchange markets; keeps the currencies of the interveners substantially undervalued, thus boosting their international competitiveness and trade surpluses. The corresponding trade deficits are spread around the world, but the largest share of the loss centers on the United States, whose trade deficit has increased by $200 billion to $500 billion per year as a result.

The United States must tighten fiscal policy over the coming decade to bring its national debt under control. Monetary policy has already exhausted most of its expansionary potential. Hence the United States must eliminate or at least sharply reduce its large trade deficit to accelerate growth and restore full employment. The way to do so, at no cost to the US budget, is to insist that other countries stop manipulating their currencies and permit the dollar to regain a competitive level. This can be done through steps fully consistent with the international obligations of the United States that are indeed based on existing International Monetary Fund (IMF) guidelines.

Such a strategy should in fact attract considerable support from other countries that are adversely affected b the manipulation, including Australia, Canada, the euro area, Brazil, India, Mexico, and a number of other developing economies. The strategy would aim to fill a major gap in the existing international financial architecture: its inability to engage surplus countries, even when they blatantly violate the legal strictures against competitive currency undervaluation, in an equitable sharing of global rebalancing requirements.

The United States and its allies should first seek voluntary agreement from the manipulators to sharply reduce or eliminate their intervention. The United States should inform the manipulators that if they do not do so, the United States will adopt four new policy measures against their currency activities. First, it will undertake countervailing currency intervention (CCI) against countries with convertible currencies by buying amounts of their currencies equal to the amounts of dollars they are buying themselves, to neutralize the impact on exchange rates. Second, it will tax the earnings on, or restrict further purchases of, dollar assets acquired by intervening countries with inconvertible currencies (where CCI could therefore not be fully effective to penalize them for building up these positions. Third, it will hereafter treat manipulated exchange rates as export subsidies for purposes of levying countervailing import duties. Fourth, hopefully with a number of other adversely affected countries, it will bring a case against the manipulators in the World Trade Organization (WTO) that would authorize more wide-ranging trade retaliation.