Lawmakers increase taxes and decrease government spending to decrease the level of demand.
If the demand for something is too high and there is not enough to be supplied, the government and lawmakers can change things up so that the demand drops by increasing rates of use or purchase. This will slow the demand and give them time to catch up or phase out the good/service in high demand.
Answer:
The answer to this solution is explained in the explanation section below
Explanation:
Solution
Given that:
- The Current Account will decrease or reduce by 120000, net foreign assets decrease.
- Nothing changes, he stocks were earlier with an American company too.
- The Current account increases, there will be no change in net foreign assets (since the check was drawn on a US bank, it means the Spanish person had already had the money in US only).
- Nothing changes, the wine was bought, from Italy, already by the restaurant.
- The Current account decreases by 3500, foreign assets decrease by the same amount.
- The Current account increases, there is no change in assets since the money was already transferred.
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