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ADJUSTMENT POLICIES - Coggle Diagram
ADJUSTMENT POLICIES
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DIRECT CONTROL
Trade controls which includes tariffs, quotas, and others to influence the import & export activity
to reduce deficit in BOP, government can apply the trade control to decrease import & increase export
in order for direct control to be effective international cooperation id required this policy is constraint by international agreement such as GATT
For example, during War World II , price which controls are employed in conjuction with consumer resurning and material locationto curve general life total acsess demand and to direct productivity resources in general desired by the government
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CONTRACTIONARY
FISCAL POLICY
Which lead to reduction in domestic production & income also decrease import that can make the deficit decrease
MONETARY POLICY
Which is discourage investment & decrease the income also encourage short term capital to lower strate taht deficit will decrease
The need for adjustment policies arise because the automatic adjustments mechanisms have serious unwanted side effect
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in fixed- exchanged rate, fiscal policy is more effective than monetary policy
in flexible-exchange rate, monetary policy is more efficient