Congratulations! You have been appointed an adviser to the IMF. A country that has run trade deficits for many years now has difficulty servicing its accumulated international debt and wants to borrow from the IMF to meet its obligations. The IMF requires that the country set a target trade surplus.
a. What monetary and fiscal policies would you suggest the IMF require of that country?
b. What would be the likely effect of that plan on the country's domestic inflation and growth?
c. How do you think the country's government will respond to your proposals? Why?