Methods of Correcting Deficit BOP - SS3 Economics Past Questions & Answers - page 1

1

Which of the following methods can a country use to correct a deficit balance of payments?

A

Export promotion

B

Import promotion

C

Currency appreciation

D

Increasing government spending

CORRECT OPTION: a
2

Which of the following methods can a government use to encourage domestic production and reduce the import of goods?

A

Export promotion

B

Import substitution

 

C

Currency devaluation

D

Increasing government spending

CORRECT OPTION: b
3

What is the potential drawback of currency devaluation as a method of correcting a deficit balance of payments?

A

It can lead to inflation and higher costs for imported goods

B

It can lead to a decrease in foreign reserves

C

It can increase the country's foreign debt

 

D

It can lead to a decrease in domestic production

CORRECT OPTION: a
4

What is the potential benefit of foreign aid and loans as a method of correcting a deficit balance of payments?

A

It can support the country's economy and reduce the trade deficit

B

It can reduce the country's foreign debt

 

C

It can increase the country's foreign reserves

D

It can lead to a decrease in domestic production

CORRECT OPTION: a
5

What is the potential benefit of reducing government spending as a method of correcting a deficit balance of payments?

A

It can reduce the outflow of foreign currency

B

It can increase domestic production

C

It can lead to an increase in foreign reserves

 

D

It can increase imports

CORRECT OPTION: a
6

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.

 

7

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.

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