When the World Bank or IMF demands a better external balance in the short term, which measure might they require as a condition for lending that involves changing expenditure patterns?

Show Answers

Redirecting purchases from domestic goods to importsReducing the value of the local currency through devaluationTightening trade by enforcing import quotasRaising government expenditure

Explanation

Expenditure switching refers to policies that encourage shifting spending away from foreign goods toward domestic products or vice versa. Devaluing the local currency (option B) makes exports cheaper and imports more expensive, thereby improving the external balance. The other options either do not directly address expenditure switching or may worsen the external balance.