Policy options for reaching internal and external balance.
You are an economic adviser to the government of Beta, an imaginary country. The currency of Beta is the baht. The country has a current account deficit and is facing gathering deflationary pressures.
a. Show the location of the Beta economy on the II-XX diagram.
b. Provide a short answer. What would be your advice on how the authorities should move the
bhat's exchange rate?
c. Provide a short answer. What would be your advice about fiscal policy? In that regard, you have two pieces of data: First, the current account deficit is small, about 3% of GDP. Second, the unemployment rate is record-high, around 25% (this means that one out of four workers cannot find a job).