Imagine a country where inflation is far under the target level, unemployment is high and the balance of payments is in a large deficit. What would an economic adviser to the government be most likely to suggest?
- 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