What might a nation use to control its foreign exchange?

A nation might utilize import permits or licenses as a means to control its foreign exchange due to the direct impact these regulations have on the quantity and type of goods that can enter the country. By requiring permits or licenses for the importation of specific goods, a country can limit the volume of imports, which helps manage its foreign currency reserves and balances its trade position. This mechanism enables the government to monitor and restrict certain imports that may consume significant amounts of foreign currency, thereby preserving its foreign exchange reserves for more essential purchases or transactions.

In contrast, while export taxes can affect the outflow of currency, they do not provide direct control over inflows of foreign currency. Import quotas restrict the total amount of specific goods that can be imported but do not facilitate specific monitoring or categorization of imports based on foreign exchange impact. Trade agreements generally focus on enhancing trade flow and do not inherently control foreign exchange directly.