The UK suffers from a persistent balance of trade deficit. what can the government do to rectify this and balance the trade figures?

Introduction- say what the trade balance is, '  the difference between the value of a country's imports and exports for a given period'.
first way to solve it- devalue the currency like we did in 1967, however that would be depreciating it now given our floating exchange rate. this would make exports cheaper and imports more expensive, thus rational consumers would respond by buying more British goods, and buying fewer foreign goods, which will help balance the trade figures.
second way- deflationary policy. by taking spending power out of the economy eg via deflationary fiscal and/or monetary policy, it reduces the propensity to important, and therefore improves trade figures. though problematic because of trade off with growth. third way- supply side policies of flexible labour markets and training and education to improve productivity and skills, making UK goods cheaper, this therefore should sell more. this assumes UK government know what will be beneficial to sell to the international market in the 21st century, and there is also a time lag.

Answered by Brendan P. Economics tutor

1913 Views

See similar Economics A Level tutors

Related Economics A Level answers

All answers ▸

Macroeconomic policy can both be a problem and a solution in economic fluctuations. Explain.


Explain the main barriers that LEDC's face when attempting to achieve stable, long-term growth


Evaluate the usefulness a knowledge of perfect competition theory in analysing the behaviour of firms. [15]


How would a policy of monetary expansion effect the domestic economy in the short term?


We're here to help

contact us iconContact usWhatsapp logoMessage us on Whatsapptelephone icon+44 (0) 203 773 6020
Facebook logoInstagram logoLinkedIn logo

© MyTutorWeb Ltd 2013–2025

Terms & Conditions|Privacy Policy
Cookie Preferences