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JAMB Economics 2007 Question 37

Question 37

Balance of Payments and Exchange Rates

One of the ways of correcting a deficit balance of payments is to

  1. A.revalue a country's currency
  2. B.devalue a country's currency
  3. C.increase imports
  4. D.reduce exports
Show the answer and explanation

Answer: B (devalue a country's currency)

Explanation

Devaluation makes exports cheaper abroad and imports dearer at home, which helps reduce a deficit.