When the world Bank or IMF requires improved external balance in the short run the agency may condition its loan on expenditure switching that is ?
Correct answer: B. devaluing local currencies
- A. switching spending from domestic to foreign sources
- B. devaluing local currencies
- C. increase trade restrictions by imposing quota
- D. increase government spending
Explanation
Expenditure switching means shifting demand from foreign goods toward domestically produced goods. Currency devaluation achieves this by making exports cheaper and imports more expensive in domestic-currency terms.
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