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Expansionary monetary policies increase one's income. For as the income increases, the imports too increase, therefore causing the trade balances to shift in the direction of deficits. As a reverse direction, the contractionary policy does the opposite from the expansionary policy. The conrtactionary policy decreases the income...
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As a reverse direction, the contractionary policy does the opposite from the expansionary policy. The conrtactionary policy decreases the income. As the income decreases so do the imports, therefore making the trade balance shift in the direction of the surplus. "Thus expansionary monetary policy increase the trade deficit; contractionary policy decrease the trade deficit...
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