When an economy is having a balance of payment surplus the best alternative opened to it is to

Analyze the question: The question asks what the best option is for a country running a balance of payments (BOP) surplus. A surplus means more foreign exchange is coming in (exports, capital inflows) than going out.

Concept: Look at what each option does to the BOP:

• Devaluation makes exports cheaper and imports dearer. That increases a surplus and is a remedy for a deficit.
• Borrowing from abroad brings in foreign funds. It is a way of financing a deficit.
• Promoting imports would reduce a surplus by increasing outflows. It would bring the BOP towards equilibrium, so it is a plausible corrective measure.
• Increasing foreign reserves means saving the surplus in the form of foreign currency and gold.

Step-by-step:

1. A surplus is not a problem the way a deficit is, so no emergency corrective measure is needed.
2. Options A and B are deficit remedies, so we eliminate them.
3. This leaves C and D. Promoting imports is a way to correct the imbalance by deliberately spending the surplus. However, the question asks for the "best alternative opened to it". The natural, simplest, and safest use of a surplus is to keep it as external reserves, which protects the currency and cushions future deficits. 4.

Note on option C: Some textbooks do list import promotion (or currency appreciation) as a way to remove a surplus. But the question stresses the "best alternative", and accumulating foreign reserves is the standard answer for a surplus economy.

Answer: D. increase its foreign reserve

Exam tip: Remember the pairing:

• Deficit → devalue, borrow, restrict imports, promote exports.
• Surplus → build up reserves (or let the currency appreciate, or increase imports).

When you see "surplus" in a JAMB question, first eliminate the deficit remedies (devaluation, borrowing). That usually leaves you with the reserves option.