Suppose a country is experiencing a situation where output is ...

[sheilaspns]

Suppose a country is experiencing a situation where output is above the full employment level of output and a trade deficit. Further assume that the policy makers' goals are to achieve full employment output and balanced trade. Given this information, what type of exchange rate and/or fiscal policy can be used to achieve simultaneously these two goals? Explain.
 
  What will be an ideal response?

Question 2

Which of the following best characterizes the economic growth for OECD countries since the mid-1970s?
 
  A) Growth has come to a complete halt.
  B) Growth has slowed down.
  C) Growth has not changed since the 1950s and 1960s.
  D) Growth has increased slightly.
  E) Growth has increased dramatically.

[k2629]

Answer to Question 1

Y must fall and NX must rise. An appreciation will not work. It would cause Y to fall but will NX will decrease even more. A fiscal contraction would work because it would reduce Y and also reduce imports which will cause NX to rise.

Answer to Question 2

B