Which of the following is not used to correct adverse balance of payment?
Answer Details
Increasing imports is not used to correct an adverse balance of payment.
An adverse balance of payment occurs when a country's imports exceed its exports over a given period, meaning the country is spending more on foreign goods and services than it is earning through its own exports. To correct an adverse balance of payment, a country can take several measures to reduce its imports, increase its exports, or both.
Increasing exports and decreasing imports are both effective ways to improve a country's balance of payment. By increasing exports, a country earns more foreign currency and by decreasing imports, it spends less foreign currency, both of which can help to correct an adverse balance of payment.
Devaluation is another measure that can be used to correct an adverse balance of payment. It involves reducing the value of a country's currency relative to other currencies, which makes the country's exports cheaper and more attractive to foreign buyers and imports more expensive for domestic buyers, thereby reducing imports.
In contrast, increasing imports would only worsen an adverse balance of payment, as it would increase the outflow of foreign currency and further exacerbate the trade deficit. Therefore, increasing imports is not used to correct an adverse balance of payment.