Question

How can the government correct an adverse balance of payments through import control?

Answer 1

• A wide range of import control measures, including tariffs and quotas, can be implemented to limit imports.
•  Quotas use quantitative limits to control the amount of imports. For instance, the government may determine that this year’s imports can only account for 90% of last year’s import volume.
• Additionally, the government may raise import taxes or levies. As a result, imports will decline and the cost of imported items will increase. Consequently, the deficit in the balance of payments is decreased.