Question
A developing country is facing a balance of payments
(BoP) crisis due to persistent trade deficits and declining foreign exchange reserves. Which of the following policy measures would be most appropriate to address this issue?Solution
- A BoP crisis occurs when a country imports more than it exports , depleting foreign reserves.
- Raising tariffs discourages imports , reducing trade imbalances.
- Printing more currency (B) would worsen inflation .
- Foreign borrowing (C) increases debt burden but does not fix trade deficits .
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