Policies impacting trade balance in BOP deficit

Steps:

• Define BOP deficit as excess imports over exports in current account.
• Assess each policy: does it reduce imports or increase exports?
• Check for policies that instead raise imports.
• Select the one that worsens the deficit.

Why B is correct:

• Increasing import quotas allows more cheap imports, raising import volume and directly worsening the trade balance per BOP accounting.

Why the others are wrong:

• A: Boosts spending on local goods, substituting for imports and improving trade balance.
• C: Forex restrictions limit import financing, curbing import demand.
• D: Export subsidies lower production costs, enhancing export competitiveness and surplus.

Final answer: B