ECONOMICS
BALANCE OF PAYMENTS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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an increase in tariffs on imported goods
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an increase in official interest rates
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an increase in subsidies to exporters
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an increase in th exchange rate
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Detailed explanation-1: -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-2: -Government can reduce substantial current account deficit by increasing exports or by decreasing imports which can be through import restrictions, quotas, or duties or by subsidizing exports.
Detailed explanation-3: -Among possible expenditure-switching policies, devaluation or revaluation is the most focused policy to affect current account balances and the equilibrium level of output.
Detailed explanation-4: -Many economists believe that the most effective way to reduce the current-account deficit is by reducing domestic spending or “absorp-tion” relative to income by increasing the national saving rate.