ECONOMICS
BALANCE OF PAYMENTS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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A devaluation and government spending cuts
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B government spending cuts and interest rate rises
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C interest rate rises and tariffs on imports
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D tariffs on imports and devaluation
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Detailed explanation-1: -A deficit in the balance of payments can also be corrected by encouraging exports. Exports can be encouraged by producing quality products, by increasing exports through increased production and productivity, and by better marketing. They can also be increased by a policy of import substitution.
Detailed explanation-2: -Quotas – Under the quota system, the government may fix and permit the maximum quantity or value of a commodity to be imported during a given period. By restricting imports through the quota system, the deficit is reduced and the balance of payments position is improved.
Detailed explanation-3: -1. Expenditure-switching policies-these are policies that are aimed at encouraging people to switch their spending from imported goods to domestic goods. These policies include tariffs and protectionism in general and manipulation of exchange rates to change the relative prices of imports.
Detailed explanation-4: -Monetary policy. Tight monetary policy involves increasing interest rates. Supply side policies. Lower wages. Protectionism. 28-Jul-2019