Question on: JAMB Economics - 2024
When an economy is having a balance of payment surplus the best alternative opened to it is to
A
devalue its currency
B
borrow from abroad
C
promote imports into the country
D
increase its foreign reserve
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Correct Option: D
A balance of payment surplus means a country is earning more from its foreign transactions than it is spending. The best course of action in this scenario is to increase its foreign reserves. This can be done by accumulating the extra foreign currency earned. Devaluing the currency (A) would likely worsen the surplus. Borrowing from abroad (B) is not the best option as the country is already in a favorable financial position. Promoting imports (C) would reduce the surplus, which is the opposite of what the country might want to do.
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