Economics (AS & A Level) · Oct / Nov 2022 · Paper 11 · Question 29
9708Policies to correct imbalances in the current account of the balance of payments
Raising interest rates is proposed to reduce a balance of payments deficit. Which justification for this action is not valid?
- AIt will attract more foreign currency inflows.
- BIt will encourage exporters to find new foreign markets.
- CIt will lower the level of imported consumer goods.
- DIt will put downward pressure on the exchange rate.
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Correct answer: D. It will put downward pressure on the exchange rate.
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