Question

6) Balance of payments of a country is a comprehensive record of all economic transactions of country with the rest of the world when the total receipts re more than the payments, then the country is said to be having a favorable balance of payments and if more than receipts, then it is said to be unfavorable. In the case of developing countries like India, imports are generally more than exports. Moreover a substantial part of their exports consist of primary goods and imports consist of machines, equipments, technology etc. this results in adverse balance of payments position. To correct the adverse balance of payments, the policy of devaluation is adopted by the government. Devaluation refers to official reduction in the external value of currency. Due to this exports will be cheaper while imports will become costlier. This will bring about improvements in the balance of payments position of the country.

Questions:

(1) Explain the relationship between elasticity of demand and balance of payments.

(2) What is the drawback in exporting primary goods and importing capital goods? Explain in detail.

(3) Explain how elasticity of demand for exports and imports can influence the devaluation process.

(4) Discuss the relationship between income elasticity of demand and balance of payments position of a poor country.​

Answer 1

particular period of time (e.g., a quarter or a year) ...

Answer 2

The elevator to success is out of order. You'll have to use the stairs one step at a time.

#BE BRAINLY!