ECONOMICS
BALANCE OF PAYMENTS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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A a cut in its interest rates
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B a rise in its income tax rates
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C cuts in subsidies to domestic industry
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D purchases of its currency by its government
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Detailed explanation-1: -For the Current Account Deficit in India, crude oil and gold imports are the primary reasons behind high CAD. The Current Account Deficit could be reduced by boosting exports and curbing non-essential imports such as gold, mobiles, and electronics. Hence, statement 3 is correct.
Detailed explanation-2: -What Is a Current Account Deficit? The current account deficit is a measurement of a country’s trade where the value of the goods and services it imports exceeds the value of the products it exports.
Detailed explanation-3: -Very poor countries typically run large current account deficits, in proportion to their gross domestic product (GDP), that are financed by official grants and loans.
Detailed explanation-4: -Devaluing the domestic currency. Reduction in the export subsidy. Adopting suitable policies which attract greater FDI and more funds from FIIs.