Suppose a Country's Output Is Below the Policy Makers' Desired

question 30

Essay

Suppose a country's output is below the policy makers' desired level of output and is experiencing a trade surplus.Assume that the policy makers' goals are to achieve the desired level of output (i.e.,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.

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Definitions:

Sales Tax

A government-imposed tax on sales of goods and services, collected by retailers at the point of sale and then passed on to the government.

Transportation Costs

Expenses incurred in the process of moving goods from one location to another, including freight, shipping, and handling fees.

Computer Equipment

The physical hardware and devices used for computing processes, such as servers, desktops, laptops, and related peripherals.

Common Stock

A form of corporate equity ownership, a type of security that signifies an ownership interest in a corporation and a claim on a portion of its profits.