If Egypt has a chronic unfavorable balance of trade, it will eventually lead to
A) the Egyptian government's decision to appreciate its currency (the pound)
B) the Egyptian government's decision to devalue its currency (the pound)
C) the Egyptian government's policy to create a favorable balance of payments
D) the Egyptian government's policy to create a favorable balance on current account
E) a negative balance of payments

Question

Quizplus · Accepted Answer

A chronic unfavorable balance of trade means that Egypt is importing more than it is exporting, leading to a deficit. To address this, the government might devalue its currency to make exports cheaper and imports more expensive, thus improving the trade balance.

If Egypt Has a Chronic Unfavorable Balance of Trade, It