Explain why expenditure switching and expenditure reducing ...

[silviawilliams41]

Explain why expenditure switching and expenditure reducing policies need to be used together.
 
  What will be an ideal response?

Question 2

Nations that have only a single abundant resource face significant risks, even when that resource is highly valued.
 
  Indicate whether the statement is true or false

[rosiehomeworddo]

Answer to Question 1

Policies that switch spending to domestic goods drive up aggregate demand, which is inflationary unless the economy is in the horizontal part of the aggregate supply curve. Expenditure reductions on their own are recessionary because they reduce aggregate demand without switching the composition of demand toward domestic producers. Thus to be successful, the policies must be used together.

Answer to Question 2

TRUE