The balance of payments constraint refers to the limits on:
A)domestic macroeconomic policy, arising from a shortage of international reserves.
B)currency convertibility observed in most developing countries.
C)macroeconomic policy resulting from IMF conditionality.
D)exchange rate policy imposed by flexible exchange rates.

Question

Quizplus · Accepted Answer

The balance of payments constraint refers to the limitations on a country's domestic macroeconomic policies, such as fiscal and monetary policies, due to a shortage of international reserves. This shortage can restrict a country's ability to engage in external trade and financial transactions, thereby influencing its economic policy decisions.

The Balance of Payments Constraint Refers to the Limits On