Which of the following policies,if adopted,will most likely restore an economy to full employment,if it is operating below full employment due to a decrease in net exports?

Question

Quizplus · Accepted Answer

When net exports decrease, it means that there is a decrease in foreign demand for domestic goods and services, leading to lower economic growth and employment levels. Devaluation of the domestic currency through a decrease in its exchange rate can make domestic goods and services relatively cheaper, leading to an increase in demand from foreign consumers and a subsequent increase in production and employment levels. Therefore, devaluation of the domestic currency is the most likely policy to restore an economy to full employment. The other choices - an increase in interest rates, decrease in investment, and decrease in demand for goods and services - can all have a contractionary effect on the economy, leading to lower employment levels.

Which of the Following Policies,if Adopted,will Most Likely Restore an Economy