In most cases, expenditure-switching policies must be accompanied by expenditure-reducing policies because Group of answer choices the depreciation in the exchange rate may decrease the domestic price of foreign goods, causing an increase in the current account deficit. inflation abroad may increase the demand for domestic goods, causing inflation to rise. expenditure-switching policies are completely ineffective without expenditure-reducing policies. inflation ensues as home country domestic expenditures switch away from foreign goods to domestic goods unless overall expenditures are reduced.

inflation ensues as home country domestic expenditures switch away from foreign goods to domestic goods unless overall expenditures are reduced.

Explanation:

Expenditure-switching policies is a macroeconomic policy and it typically include measures that are undertaken by the government of a particular country to reduce deficit in its current account balance i.e they're used to balance the current account of a country through an alteration of its expenditures on both domestic and foreign goods.

Generally, expenditure-switching policies involves the use of increased barrier to trade (entry) such as protectionist subsidies, quotas or tariffs, so as to switch the expenditures of domestic consumers foreign (imported) goods and services to goods and services that are produced domestically.

Similarly, expenditure-reducing policies are measures undertaken by the government of a particular country so as to improve the imbalance in its current account and reduce its external deficit. Thus, expenditure-reducing policies lowers aggregate demand, real income and overall spending in an economy, so as to cut the demand for imports by consumers.

In most cases, expenditure-switching policies must be accompanied by expenditure-reducing policies because inflation arises when a home country domestic expenditures switch away from foreign (imported) goods to domestic goods, unless the government reduces overall expenditures.

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