If Japan has a trade surplus and the United States has a trade deficit, the trade gap could be eliminated by:
A)contractionary monetary policy in both Japan and the United States.
B)expansionary monetary policy in both Japan and the United States.
C)expansionary monetary policy in Japan or contractionary monetary policy in the United States.
D)contractionary monetary policy in Japan or expansionary monetary policy in the United States.

Question

Quizplus · Accepted Answer

Expansionary monetary policy in Japan would likely increase domestic consumption and imports, potentially reducing its trade surplus. Contractionary monetary policy in the United States could decrease domestic consumption and imports, potentially reducing its trade deficit.

If Japan Has a Trade Surplus and the United States