Balance of payment deficit can be removed through:(a) Devaluation of currency (b) Export promotion(C) Import substitution (d) All of the above.
Question
Balance of payment deficit can be removed through:(a) Devaluation of currency (b) Export promotion(C) Import substitution (d) All of the above.
Solution
The balance of payment deficit can be removed through the following steps:
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Devaluation of currency: Devaluation refers to the deliberate reduction in the value of a country's currency relative to other currencies. By devaluing the currency, the country's exports become cheaper for foreign buyers, which can lead to an increase in export demand. This can help to reduce the balance of payment deficit by increasing export earnings.
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Export promotion: Export promotion involves implementing policies and strategies to encourage and support the growth of exports. This can include providing financial incentives, improving trade infrastructure, conducting market research, and participating in international trade fairs and exhibitions. By promoting exports, a country can increase its export earnings and reduce the balance of payment deficit.
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Import substitution: Import substitution refers to the strategy of producing domestically what a country would otherwise import. By promoting domestic production and reducing reliance on imports, a country can reduce its import expenditure and improve its balance of payment position. This can be achieved through various measures such as implementing trade barriers, providing subsidies to domestic industries, and promoting technological advancements.
Therefore, the correct answer to the question is (d) All of the above. All three steps - devaluation of currency, export promotion, and import substitution - can contribute to removing a balance of payment deficit.
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