A country has a deficit on the current account of the balance of payments. The government can try to reduce this deficit by using either an expenditure-switching policy or an expenditure-reducing policy. Under which conditions will an expenditure-reducing policy be more successful than an expenditure-switching policy?
A.
B.
C.
D.
Exam No：9708_s25_qp_34 Year：2025 Question No：26
Answer:
B
Knowledge points:
11.1.3 difference between expenditure-switching and expenditure-reducing policies
2.2.1 definition of price elasticity, income elasticity and cross elasticity of demand (PED, YED, XED)
9.1.2.1 consumption function: autonomous and induced consumer expenditure
9.1.2.2 savings function: autonomous and induced savings
9.1.2.3 autonomous and induced investment; the accelerator
9.1.2.4 government spending
9.1.2.5 net exports (exports minus imports)
Solution:
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