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

Question

Quizplus · Accepted Answer

When a country has a trade deficit under a fixed exchange rate system, it means that the outflow of currency to pay for imports is greater than the inflow of currency from exports. This can lead to a shortage of foreign reserves and pressure on the country's currency. To correct this situation, the country can decrease aggregate demand through restrictive fiscal and monetary policy. This can lead to a decrease in imports and an increase in exports, which would help balance the trade deficit.

One Method for a Deficit Country to Correct the Situation