If an unexpected balance of trade surplus arises, which short-run policies should the government use to preserve the economy’s existing equilibrium? (Diagram: economy in full-employment equilibrium with LRAS and AD.)
- Ahigher government spending on education financed by an equal rise in direct taxation
- Bhigher direct taxation with government spending unchanged to create a budget surplus
- Chigher spending on infrastructure financed by a budget deficit
- Dlower interest rates to promote investment spending in the private sector