ECONOMICS
BALANCE OF PAYMENTS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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A an increase in expenditure promoting locally produced goods
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B an increase in the quota on cheap imports
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C an increase in the restrictions on foreign exchange
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D an increase in the subsidies to exporting industries
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Detailed explanation-1: -Capital inflow is not the cause of the deficit in the balance of payments (Option B). When there is a deficit in the balance of payment or trade, the demand for foreign currency rises, and also the loss of national currency is caused.
Detailed explanation-2: -The balance of payments (BOP) is the method by which countries measure all of the international monetary transactions within a certain period. The BOP consists of three main accounts: the current account, the capital account, and the financial account.
Detailed explanation-3: -(i) Export promotion: Exports should be encouraged by granting various bounties to manufacturers and exporters. (ii) Import: Restrictions and Import Substitution are other measures of correcting disequilibrium. (iii) Reducing inflation: (iv) Exchange control:
Detailed explanation-4: -Attract more foreign investment. Increase exports. Decrease unnecessary imports.