Question: (a) (i) Define the term deflationary gap identified in bold in the text (paragraph 3). [2 marks] (ii) Define the term industrial policy identified in

(a) (i) Define the term deflationary gap identified in bold in the text (paragraph 3). [2 marks] (ii) Define the term industrial policy identified in bold in the text (paragraph 4). [2 marks] (b) Explain how a fall in Mexico's exports affects its balance of payments, and through what account. [4 marks] (c) Using an AD-AS diagram, explain the impact on Mexico's deflationary gap of an increase in US tourism in Mexico due to a lower value of the peso (paragraph 7). [4 marks] (d) Using information in the text and your knowledge of economics, discuss the role of Mexico's membership in NAFTA on Mexico's export performance and economy. [8 marks]

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