Finance Questions 70 2-3

---

1. Suppose a country with floating exchange rates has a current account deficit which its government considers is too large.

1. Use a AA-DD diagram to show how monetary policy could be used to reduce the current account deficit. Does this action help or hinder its goal of maintaining low unemployment


2. Use a AA-DD diagram to show how fiscal policy could be used to reduce the current account deficit. Does this action help or hinder its goal of maintaining low unemployment?

 

International Finance Theory and Policy - Chapter 70: Last Updated on 1/6/08