Reducing secondary income deficit via outflow cuts

Steps:

• Identify secondary income as current account section for transfers like aid and remittances, excluding investment income.
• Note deficit occurs when outflows exceed inflows, so policies must target reducing outflows or boosting inflows.
• Evaluate options: A and B affect goods trade; C impacts migrant remittances (outflows); D cuts aid (outflows).
• Select most direct outflow reduction without trade distortions.

Why D is correct:

• Secondary income deficit shrinks when overseas aid donations (unilateral transfers outflow) are reduced, per balance of payments definition.

Why the others are wrong:

• A: Subsidies boost exports, improving goods balance, not secondary income.
• B: Tariffs curb imports, affecting goods balance, irrelevant to secondary income.
• C: Limits migrant inflows, slightly cutting remittance outflows, but less effective than aid cuts.

Final answer: D