Figure 19-2

Of the graphs in Figure 19-2, where the broken line represents the fixed exchange rates, which one shows how a balance of payments deficit could be reduced through a recession in Japan?

Question

Figure 19-2

Of the graphs in Figure 19-2, where the broken line represents the fixed exchange rates, which one shows how a balance of payments deficit could be reduced through a recession in Japan?

Quizplus · Accepted Answer

In graph 2, a recession in Japan would cause a decrease in imports, as less money is being spent domestically, represented by a leftward shift in the import function. This decrease in imports would lead to an improvement in the balance of payments and a reduction in the current account deficit.

Figure 19-2 Of the Graphs in Figure 19-2, Where the Broken Line