When imports fall
When imports are more than exports
When exports fall
When exports increase
Answer is Right!
Answer is Wrong!
The correct answer is: B. When imports are more than exports.
An adverse balance of payments is a situation in which a country imports more goods and services than it exports. This can lead to a number of problems, such as a decrease in the value of the country’s currency, inflation, and unemployment.
There are a number of factors that can contribute to an adverse balance of payments, such as:
- A strong domestic economy: When the economy is strong, people have more money to spend, which can lead to an increase in imports.
- A weak foreign economy: When the economies of other countries are weak, they may not be able to afford to buy as many goods and services from our country, which can lead to a decrease in exports.
- A high exchange rate: When the value of our currency is high, it makes it more expensive for foreigners to buy our goods and services, which can lead to a decrease in exports.
- A low exchange rate: When the value of our currency is low, it makes it cheaper for us to buy goods and services from other countries, which can lead to an increase in imports.
There are a number of things that a country can do to try to correct an adverse balance of payments, such as:
- Devalue the currency: This makes it cheaper for foreigners to buy our goods and services, which can lead to an increase in exports.
- Increase taxes on imports: This makes it more expensive for people to buy imported goods, which can lead to a decrease in imports.
- Reduce government spending: This reduces the amount of money that the government needs to borrow, which can help to reduce the demand for foreign currency.
- Increase interest rates: This makes it more expensive for businesses to borrow money, which can reduce their investment in new projects, which can lead to a decrease in imports.
It is important to note that there is no one-size-fits-all solution to the problem of an adverse balance of payments. The best course of action will vary depending on the specific circumstances of each country.