Imagine a country with an inflation rate far under its target level, a high level of unemployment and a substantial balance of payments deficit. What would an economic advisor to the government be most likely to advise?
- Aa long-run supply side policy, aimed at improving the country’s efficiency, so improving both the unemployment and the balance of payments positions
- Ba revaluation of its currency, because that would lead to reduced unemployment and an improved balance of payments
- Ca rise in interest rates, because it would lead to an improved balance of payments and help achieve the inflation target
- Da rise in levels of direct taxation, because that would improve unemployment and move inflation in the direction of a target level