Q.Explain the trade (non-monetary) measures used to correct disequilibrium in the Balance of Payments.

Trade measures work directly on the flow of goods across the border, rather than on the currency or money supply. …

Export promotion — the government offers incentives such as export subsidies, tax concessions, and simplified customs/documentation procedures to encourage domestic producers to sell more abroad, raising foreign-exchange earnings.

Import substitution — encouraging domestic industries to produce goods that were previously imported (e.g. building domestic capacity for goods earlier bought from abroad), which reduces the country's dependence on imports over time.

Tariffs — customs duties are raised on imported goods, making them costlier relative to domestically produced substitutes, which discourages importing.

Import quotas — the government sets a direct physical ceiling on the quantity of a good that may be imported in a given period, regardless of price, which caps the import bill. …

Mixing up tariffs (a price-based tool, a tax on imports) with quotas (a quantity-based tool, a physical limit) — both restrict imports but through di …