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Fiscal and monetary expansion

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After 1985, the United States asked Germany and Japan to adopt fiscal and monetary expansion as ways of increasing foreign demand for U.S. output and reducing the American current account deficit. Would fiscal expansion by Germany and Japan have accomplished these goals? What about monetary expansion? Would your answer change if you thought different German and Japanese policies might facilitate different U.S. policies.

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The solution goes into a great amount of detail related to fiscal and monetary expansion. The response does a very good job of responding to the questions being asked and provide clear and concise answers to the problem. This is a great response for students looking to better understand this topic.

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a) Fiscal expansion:
By raising government expenditure, domestic demand will rise with government spending, which will result in an increase in imports of US output.

By reducing the tax rate, domestic demand will rise with more disposable ...

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