Analogies between public and private debt are usually misleading

Refer to Figure 19-6. Which of the following would cause the change depicted in the figure above?

A) Dumping accusations result in the United States placing tariffs on produce imported from Mexico. B) An increase in investment in infrastructure causes U.S. productivity to rise relative to Mexican productivity. C) A declining preference for Kentucky bourbon causes Mexican consumers to decrease their preferences for U.S.-produced alcohol relative to Mexican-produced alcohol. D) A contractionary monetary policy causes a decrease in the price level of U.S. goods relative to Mexican goods.

Explain the traditional interest-rate channel for expansionary monetary policy. Explain how a tight monetary policy affects the economy through this channel

What will be an ideal response?