In relation to a country's economy,if a country's current account deteriorates,the government is likely to:
A) loosen monetary policy.
B) increase government expenditure.
C) tighten interest rates.
D) lower taxes.

Question

Quizplus · Accepted Answer

If a country's current account deteriorates, it means that its imports are exceeding its exports, which can weaken the country's currency. To address this, the government is likely to tighten interest rates to make the currency more attractive to foreign investors, thereby increasing the demand for it and stabilizing the exchange rate. This can also help to reduce imports and encourage exports, which can improve the country's current account balance. Choices A, B, and D would have expansionary effects on the economy and may further aggravate the current account deficit.

In Relation to a Country's Economy,if a Country's Current Account