Under a system of flexible exchange rates,what will correct a deficit in a country's balance of payments?

Question

Quizplus · Accepted Answer

A deficit in a country's balance of payments indicates an excess of imports over exports. To correct this, the country needs to make its exports more competitive and imports less attractive, which can be achieved by depreciation of the nation's currency. This makes exports cheaper in foreign currency terms while making imports relatively more expensive for domestic consumers. This should, in turn, increase demand for domestic goods and decrease demand for foreign goods, ultimately reducing the trade deficit.

Under a System of Flexible Exchange Rates,what Will Correct a Deficit