Which policy is an expenditure-switching policy?
A) Increase in the money supply
B) Decrease in government expenditures
C) Increase in business and household taxes
D) Decrease in import tariffs

Question

Quizplus · Accepted Answer

Decreasing import tariffs is an expenditure-switching policy because it makes imported goods relatively more expensive compared to domestic goods. This encourages consumers to switch their expenditure from imports to domestic goods, which can help to reduce a trade deficit or improve a country's balance of payments. The other policy options (increase in money supply, decrease in government expenditures, increase in taxes) do not directly involve shifting consumption or production towards domestic goods.

Which Policy Is an Expenditure-Switching Policy