Suppose Japan is currently running a current account surplus.The most effective way of eliminating this current account surplus would be to temporarily ________ government purchases and ________ the domestic money supply.
A)increase; increase
B)increase; decrease
C)decrease; increase
D)decrease; decrease

Question

Quizplus · Accepted Answer

Increasing government purchases injects more money into the economy, boosting domestic consumption and potentially increasing imports. Increasing the domestic money supply lowers interest rates, encouraging more spending and investment, further increasing imports relative to exports, which can help eliminate a current account surplus.

Suppose Japan Is Currently Running a Current Account Surplus