Essay
For each of the following situations,state for each what aggregate demand policy the country was most likely following:
(a)The economy has been growing and experiencing inflation.At the same time interest rates have been declining while the trade deficit has worsened.
(b)The economy has been growing and experiencing inflation.At the same time interest rates have been rising while the trade deficit has worsened.In this case,rising interest rates failed to attract significant capital inflow.
(c)Inflation has subsided while the exchange rate has risen.
(d)The economy's competitiveness has eroded due to a rising exchange rate and domestic inflation and interest rates have risen.Still,the economy has been enjoying healthy growth.In this case,exchange rates have risen because rising interest rates attracted significant capital inflow.
Correct Answer:

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(a)Expansionary monetary policy.
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(b)Expa...
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