If a country is grappling with a major balance-of-payment difficulty, it may not be able to expand imports from the outside world. Instead, the country may be tempted to
A)impose measures to restrict imports.
B)impose measures to discourage capital outflows.
C)Both a and b
D)None of the above

Question

Quizplus · Accepted Answer

If a country is facing a major balance-of-payment difficulty, it may not have the necessary funds to expand imports from other countries. In such a situation, the country may be tempted to impose measures to restrict imports to conserve its foreign exchange reserves. Similarly, the country may also try to discourage capital outflows, which can further deplete its foreign exchange reserves. Therefore, both options - imposing measures to restrict imports and discourage capital outflows - may be tempting for a country grappling with a balance-of-payment difficulty.

If a Country Is Grappling with a Major Balance-Of-Payment Difficulty