Question
Now suppose the economy is still experiencing a recessionary gap despite the monetary expansion and fiscal stimulus packages initiated. As the same time, a trade
Now suppose the economy is still experiencing a recessionary gap despite the monetary expansion and fiscal stimulus packages initiated. As the same time, a trade deficit also occurs in its trade balance position. Price elasticity of demand for export and import for this economy is 0.8 and 0.7 respectively. Government's goal is to eliminate the remaining recessionary gap and to remove the trade deficit.
Referring to Scenario 3, utilise the given information to critically explain what policy combination is needed to address this issue. (Note: you may use appropriate graph to aid your explanation).
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