One Method for a Deficit Country to Correct the Situation

question 43

Multiple Choice

One method for a deficit country to correct the situation under a fixed exchange rate system is to

• A)increase aggregate demand with stimulative monetary policy.
• B)increase aggregate supply with tax cuts.
• C)decrease aggregate demand with restrictive fiscal and monetary policy.
• D)decrease aggregate supply with restrictive fiscal policy.

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Definitions:

Compounded Monthly

Interest calculation method where the interest earned is added to the principal each month, resulting in interest on interest.

Monthly Deposits

Regular payments deposited into a financial account or investment plan on a monthly basis, typically to save or earn interest over time.

Investment

The allocation of resources, usually money, to generate income or profit, including purchasing assets or securities.

Compounded Continuously

Compounded continuously refers to the mathematical limit that compound interest can reach if it is calculated and added to the principal balance continuously, leading to exponential growth.