If a country's import bill is high, she can encourage exports by___________
Answer Details
If a country's import bill is high, that means the country is spending more money on importing goods from other countries than it is earning from exporting its own goods to other countries. To encourage exports and reduce the trade deficit, the country can take several measures. One such measure is to allow its currency to depreciate.
When a country's currency depreciates, its goods become relatively cheaper compared to other countries. As a result, other countries may be more willing to buy goods from that country, increasing its exports. Additionally, when the country's currency depreciates, its own citizens may also be more inclined to buy locally produced goods instead of imported goods because imported goods will become relatively more expensive.
Allowing the country's currency to appreciate, on the other hand, would make its goods more expensive compared to other countries. This could lead to a decrease in exports and an increase in imports, exacerbating the trade deficit.
Liberalizing importation could make it easier for foreign goods to enter the country, which could increase competition for local producers. This may lead to an increase in imports, but it may not necessarily encourage exports.
Increasing taxes on all locally produced goods would likely decrease demand for those goods, leading to a decrease in production and potentially leading to higher unemployment. This measure would not encourage exports and would not necessarily reduce imports either.