Expenditure-switching and expenditure-reducing policies
Governments use two main strategies to fix a current account deficit. Expenditure-switching redirects spending away from imports toward domestic goods. Expenditure-reducing cuts total spending in the economy.
Real World
The US imposed tariffs on Chinese steel imports in 2018 as an expenditure-switching policy, aiming to redirect American manufacturers toward domestically produced steel rather than cheaper Chinese imports.
Exam Focus
Explicitly label each policy as switching or reducing in your answer — examiners award a mark for correct classification before you evaluate.
Price Elasticity of Demand
PED = % change in quantity demanded ÷ % change in price
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