Policies boosting imports without enhancing exports

Steps:

• Current account surplus means exports exceed imports plus net transfers.
• Reducing surplus requires increasing imports or decreasing exports to lower net exports.
• No tariffs lower import costs, raising import volume.
• No devaluation avoids making exports cheaper abroad.
• Expansionary monetary policy increases domestic income and import demand.

Why B is correct:

• B applies the income absorption approach: higher income from expansionary policy raises imports (M = mY, where m is marginal propensity to import), no tariffs facilitate this, and no devaluation prevents export rise, shrinking surplus.

Why the others are wrong:

• A: Devaluation depreciates currency, boosting exports via price competitiveness and worsening surplus.
• C: Tariffs raise import prices, reducing imports and increasing surplus despite other elements.
• D: Tariffs reduce imports while devaluation boosts exports, both expanding surplus.

Final answer: B