Methods of Correcting Deficit BOP - SS3 Economics Past Questions and Answers - page 1
Which of the following methods can a country use to correct a deficit balance of payments?
Export promotion
Import promotion
Currency appreciation
Increasing government spending
Which of the following methods can a government use to encourage domestic production and reduce the import of goods?
Export promotion
Import substitution
Currency devaluation
Increasing government spending
What is the potential drawback of currency devaluation as a method of correcting a deficit balance of payments?
It can lead to inflation and higher costs for imported goods
It can lead to a decrease in foreign reserves
It can increase the country's foreign debt
It can lead to a decrease in domestic production
What is the potential benefit of foreign aid and loans as a method of correcting a deficit balance of payments?
It can support the country's economy and reduce the trade deficit
It can reduce the country's foreign debt
It can increase the country's foreign reserves
It can lead to a decrease in domestic production
What is the potential benefit of reducing government spending as a method of correcting a deficit balance of payments?
It can reduce the outflow of foreign currency
It can increase domestic production
It can lead to an increase in foreign reserves
It can increase imports
What is a deficit balance of payments?
A deficit balance of payments occurs when a country's imports exceed its exports, leading to an outflow of currency.
What are the potential impacts of a deficit balance of payments on a country's economy?
The potential impacts of a deficit balance of payments on a country's economy include a decrease in foreign reserves, currency devaluation, and inflation.