If the government of a small open economy wishes to reduce a trade deficit, which policy action will be successful in achieving this goal?
A) increasing taxes
B) increasing government spending
C) increasing investment tax credits
D) imposing protectionist trade policies

Question

Quizplus · Accepted Answer

Increasing taxes can reduce disposable income, leading to lower consumption and imports, thus potentially reducing the trade deficit.

If the Government of a Small Open Economy Wishes to Reduce