In using exchange controls, a nation attempts to eliminate a balance of payments deficit by:
A)limiting its imports to the dollar value of its exports.
B)decreasing the nation's domestic price level.
C)limiting its exports to the dollar value of its imports.
D)appreciating the value of its currency.

Question

Quizplus · Accepted Answer

Exchange controls limit the amount of foreign currency that can be purchased or sold in the domestic currency market, thereby limiting imports to the dollar value of exports. This helps to balance the trade deficit and reduce the outflow of foreign currency, which in turn stabilizes the exchange rate.

In Using Exchange Controls, a Nation Attempts to Eliminate a Balance