When a member's currency is declared "scarce", it is the duty of the IMF to______

Analyze the question: It asks what the IMF does when a member's currency is declared "scarce." This comes from the IMF's Articles of Agreement, specifically the "scarce currency clause."

Concept: Under the IMF Articles of Agreement (Article VII), if the demand for a member's currency threatens the Fund's ability to supply it, the Fund can formally declare that currency "scarce." The currency is typically scarce because the country has a persistent balance of payments surplus, so other countries run out of it.

Once a currency is declared scarce, the Fund:

1. Apportions (rations) the limited supply of that currency among the members who need it.
2. Allows members to impose temporary restrictions on trade or exchange dealings in the scarce currency, as a way to protect their own economies.

Evaluating the options:

• A. Suspend the member state indefinitely. Incorrect. A scarce currency is not a punishment of the issuing country, and the member isn't suspended.
• B. Ban all exports from that state. Incorrect. The IMF has no power to ban a country's exports.
• C. Suspend dealings in that currency for one year. Incorrect. No fixed one-year suspension exists in the rules.
• D. Ration it among the countries demanding it. Correct. This matches the Fund's duty to apportion the scarce currency fairly among members that need it.

Answer: D, the IMF rations the scarce currency among the countries demanding it.

Exam tip: Remember the word scarce means "not enough to go around," so the logical response is rationing. When an option sounds like a harsh punishment (suspend, ban), it is usually a distractor in IMF questions, because the IMF's role is to help stabilize the system rather than penalize.