Concept:A balance of payment deficit occurs when a country spends more on imports than it earns from exports.
Explanation:The balance of payment can be shown as
BOP=X−M, where
X is export earnings and
M is import expenditure.
When
M>X, the
BOP becomes negative, so the country faces a deficit.
Unrestricted imports mean foreign goods and services enter the country without limits or heavy tariffs.
As a result, payments made to foreign sellers increase beyond the income received from foreign buyers.
This continuous outflow of money causes a deficit in the balance of payment.
Revaluation of currency, sale of foreign reserves, and unrestricted exports do not directly cause a deficit.
In fact, greater exports help improve the balance of payment.
Answer:D. unrestricted imports