Question

when a country suffers from deficit in the balance of payments the Central bank -- is the bank rate.

a. Do not change
b. Increases
c. decrease
d. none of this above
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Answer 1

Explanation:

increasees is the bank rate0

Answer 2

When a country suffers from deficit in the balance of payments the Central bank increases is the bank rate.

• A cognitive deficit in the appropriate BoP typically denotes the country is importing more commodities and necessary capital than it exports and has to borrow to properly pay for its imports from other countries.
• Government substantially increases the effective interest rates to sufficiently reduce inflation rates, thereby making export prices competitive and as a direct result, principal exports typically increase.  
• However as specific demand for the currency increases, a gradual rise in effective interest rates can lead to a proper appreciation of the currency. This therefore increases the export price again as the economic value of the currency increases.