Concept:Reducing imports lowers the demand for foreign exchange, which helps support the external value of the local currency.
Explanation:The external value of a local currency depends on the supply of and demand for foreign exchange.
When imports rise, more foreign currency is needed to pay for them, increasing the demand for foreign exchange.
This causes the local currency to depreciate or lose external value.
To stabilise the currency, a country should reduce the demand for imports.
This lowers the outflow of foreign exchange and lessens pressure on the local currency.
Increasing imports, raising domestic money supply, or reducing exports would all worsen the currency’s external value.
Answer:D. reduce the demand for imports