Suppose that under a regime of fixed exchange rates the government
imposes a uniform tariff on all imports in order to bring
the economy out of a recession. Equivalent output and employment
effects could be achieved by
1. letting the exchange rate float and
imposing an appropriate monetary expansion.
2. keeping the exchange rate fixed and
applying an appropriate subsidy to exports.
3. both of the above.
4. neither of the above.
Choose the option above that is correct.