What are the most important instruments of international economic policy?

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What are the most important instruments of international economic policy?

What are the most important instruments of international economic policy?

 

Answer & Explanation (1)

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Governments can switch or change expenditure using fiscal and monetary policies.

Explanation

The international economic policy have several instruments which are pursued by countries time and again to attain particular goals.They are as follows:

Expenditure changing policies:These involve changing the amount of expenditure incurred on goods and services,including domestically produced as well as imports.These policies are implemented using fiscal policy and monetary policy to alter the spending by government and consumers.
Expenditure switching policies: These involve diverting the expenditure to a different direction.There is a shift in the demand between domestic goods and imports depending upon the tool used.For example: devaluation can be used to shift the demand to domestic goods from imports.
Direct control: These involve direct steps taken by the government to target selective expenditure.These can be in form of tariff , import duties or taxes.They restrain or stimulate capital flows.

Verified Answer

International economic policy is managed through the policies altering the expenditure by completely switching expenditure or by nudging consumer preference to shift spending to new direction.Hence to attain external and internal balance, policy makers indulge in expenditure changing policies,expenditure switching policies, and direct controls.These are the main instruments related to international policy making.

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