The United States has experienced a persistent deficit on its balance of trade in goods for many decades. While expenditure-switching policies like tariffs have often been discussed, macroeconomic policymakers can also utilize expenditure-reducing policies to address this external imbalance. However, central banks and governments often prioritize domestic objectives like GDP growth and full employment.
Explain how expenditure-reducing policies can be used to reduce a deficit on a country's balance of trade in goods and services.
310 exam-style questions on AQA A Level Economics 2.6 The international economy (A-level only), covering 2.6.1 Globalisation, 2.6.2 Trade, 2.6.3 The balance of payments, 2.6.4 Exchange rate systems, and 2.6.5 Economic growth and development. Each one has a worked solution and a mark scheme showing where the marks go.