why contractionary monetary policy can solve trade deficit?

why contractionary monetary policy can solve trade deficit?

monetary policy 同 trade 有關ka咩?

Update:

thx , but i think i have no time la~

1 Answer

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  • Teresa
    Lv 6
    1 decade ago
    Favorite Answer

    首先define monetary policy:change money supply or change interest rate or both

    然後define contractionary monetary policy:decrease money supply or increase interest rate

    effect: equilibrium income decrease

    use a Y-E (4 sector model) diagram, you can see that when Ye decrease, trade deficit decrease.

    2007-04-15 13:20:01 補充:

    中七還是會考程度﹖明天考高考﹖可send信件給我傾傾。

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