If an economy sees net exports fall due to a policy of trade liberalization,it will require the simultaneous adoption of ________ fiscal policy or ________ monetary policy in order to prevent a(n)________ gap.

Question

Quizplus · Accepted Answer

When net exports fall, aggregate demand decreases, potentially leading to a recessionary gap. Expansionary fiscal or monetary policy can increase aggregate demand to counteract this effect.

If an Economy Sees Net Exports Fall Due to a Policy