Exchange Rates and the Balance of Payments (id: ec11a1259)

本题目来源于试卷: Exchange Rates and the Balance of Payments，类别为 IB经济学

[单选题]
Which of the followinctgbnpq;//wh *g0p( hg is anraaq27ak 4r r5 expenditure-switching policy to correct a persistent current accounk2 r4qa 7r5raat deficit?

I. Imposition of tariffs
II. Revaluation of currency
III. Increasing interest rates
IV. Granting subsidies to export-oriented industries

A. I only
B. I and II only
C. I and IV only
D. III only


参考答案:  A


本题详细解析:

A

$\underset{‾}{\text{Explanation}}$:
Expenditure-switching policies aim to switch consumption from imported goods to domestically produced goods.

Statement I is correct because imposing tariffs makes imports costly, so countries spend less on imports. This helps to correct the persistent current account deficits.

Statement II revaluation of currency leads to a fall in import prices thereby making imports cheap and hence expenditures on imports further increase, increasing current account deficits.

Statement III is incorrect as increasing the interest rate is an expenditure-reducing policy.

Statement IV is incorrect as expenditure-switching policies focus on reducing spending on foreign goods. However, granting subsidies to export-oriented industries promotes production for exports.

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