4.3.3 - Balance of payments, exchange rates and international competitiveness

Components of the balance of payments: payments; the current account; the capital and financial accounts.

Use a - components of the balance of payments: payments • the current account • the capital and to connect the rule to the data and decision in the question.

This matters because a - components of the balance of payments: payments • the current account • the capital and determines what can be inferred or chosen; begin with the stated conditions and keep the conclusion tied to the evidence.

Example: apply a - components of the balance of payments: payments • the current account • the capital and to one small, clearly defined case, show the key step or comparison, and explain the result in words.

Boundary: a - Components of the balance of payments: payments • the current account • the capital and is not a universal recommendation. Check the syllabus scope, assumptions, units and the limits of the evidence before generalising.

Causes of deficits and surpluses on the current account.

Use b - causes of deficits and surpluses on the current account to connect the rule to the data and decision in the question.

This matters because b - causes of deficits and surpluses on the current account determines what can be inferred or chosen; begin with the stated conditions and keep the conclusion tied to the evidence.

Example: apply b - causes of deficits and surpluses on the current account to one small, clearly defined case, show the key step or comparison, and explain the result in words.

Boundary: b - Causes of deficits and surpluses on the current account is not a universal recommendation. Check the syllabus scope, assumptions, units and the limits of the evidence before generalising.

Measures to reduce a country's imbalance on the current account.

Use c - measures to reduce a country's imbalance on the current account to connect the rule to the data and decision in the question.

This matters because c - measures to reduce a country's imbalance on the current account determines what can be inferred or chosen; begin with the stated conditions and keep the conclusion tied to the evidence.

Example: apply c - measures to reduce a country's imbalance on the current account to one small, clearly defined case, show the key step or comparison, and explain the result in words.

Boundary: c - Measures to reduce a country's imbalance on the current account is not a universal recommendation. Check the syllabus scope, assumptions, units and the limits of the evidence before generalising.

The significance of global trade imbalances.

Use d - significance of global trade imbalances to connect the rule to the data and decision in the question.

This matters because d - significance of global trade imbalances determines what can be inferred or chosen; begin with the stated conditions and keep the conclusion tied to the evidence.

Example: apply d - significance of global trade imbalances to one small, clearly defined case, show the key step or comparison, and explain the result in words.

Boundary: d - significance of global trade imbalances is not a universal recommendation. Check the syllabus scope, assumptions, units and the limits of the evidence before generalising.

The distinction between fixed, managed and floating exchange rates.

Use a - distinction between fixed, managed and floating exchange rates to connect the rule to the data and decision in the question.

This matters because a - distinction between fixed, managed and floating exchange rates determines what can be inferred or chosen; begin with the stated conditions and keep the conclusion tied to the evidence.

Example: apply a - distinction between fixed, managed and floating exchange rates to one small, clearly defined case, show the key step or comparison, and explain the result in words.

Boundary: a - distinction between fixed, managed and floating exchange rates is not a universal recommendation. Check the syllabus scope, assumptions, units and the limits of the evidence before generalising.

Government intervention in currency markets through:; foreign currency transactions; the use of interest rates; quantitative easing.

Use b - government intervention in currency markets through: • foreign currency transactions • to connect the rule to the data and decision in the question.

This matters because b - government intervention in currency markets through: • foreign currency transactions • determines what can be inferred or chosen; begin with the stated conditions and keep the conclusion tied to the evidence.

Example: apply b - government intervention in currency markets through: • foreign currency transactions • to one small, clearly defined case, show the key step or comparison, and explain the result in words.

Boundary: b - Government intervention in currency markets through: • foreign currency transactions • is not a universal recommendation. Check the syllabus scope, assumptions, units and the limits of the evidence before generalising.

Factors influencing floating exchange rates:; relative interest rates; relative inflation rates (purchasing power parity theory); current account of the balance of payments; strength of the economy; capital flight; expectations and speculation; global factors, e.g. falls in commodity prices.

Use c - factors influencing floating exchange rates: • relative interest rates • relative to connect the rule to the data and decision in the question.

This matters because c - factors influencing floating exchange rates: • relative interest rates • relative determines what can be inferred or chosen; begin with the stated conditions and keep the conclusion tied to the evidence.

Example: apply c - factors influencing floating exchange rates: • relative interest rates • relative to one small, clearly defined case, show the key step or comparison, and explain the result in words.

Boundary: c - Factors influencing floating exchange rates: • relative interest rates • relative is not a universal recommendation. Check the syllabus scope, assumptions, units and the limits of the evidence before generalising.

The distinction between revaluation and appreciation of a currency.

Use d - distinction between revaluation and appreciation of a currency to connect the rule to the data and decision in the question.

This matters because d - distinction between revaluation and appreciation of a currency determines what can be inferred or chosen; begin with the stated conditions and keep the conclusion tied to the evidence.

Example: apply d - distinction between revaluation and appreciation of a currency to one small, clearly defined case, show the key step or comparison, and explain the result in words.

Boundary: d - distinction between revaluation and appreciation of a currency is not a universal recommendation. Check the syllabus scope, assumptions, units and the limits of the evidence before generalising.

The distinction between devaluation and depreciation of a currency.

Use e - distinction between devaluation and depreciation of a currency to connect the rule to the data and decision in the question.

This matters because e - distinction between devaluation and depreciation of a currency determines what can be inferred or chosen; begin with the stated conditions and keep the conclusion tied to the evidence.

Example: apply e - distinction between devaluation and depreciation of a currency to one small, clearly defined case, show the key step or comparison, and explain the result in words.

Boundary: e - distinction between devaluation and depreciation of a currency is not a universal recommendation. Check the syllabus scope, assumptions, units and the limits of the evidence before generalising.

The impact of changes in exchange rates on:; the current account of the balance of payments (with reference to Marshall-Lerner condition and to the J-curve effect); the capital and financial accounts of the balance of payments; economic growth; employment and unemployment; rate of inflation; FDI flows.

Use f - impact of changes in exchange rates on: • the current account of the balance of to connect the rule to the data and decision in the question.

This matters because f - impact of changes in exchange rates on: • the current account of the balance of determines what can be inferred or chosen; begin with the stated conditions and keep the conclusion tied to the evidence.

Example: apply f - impact of changes in exchange rates on: • the current account of the balance of to one small, clearly defined case, show the key step or comparison, and explain the result in words.

Boundary: f - impact of changes in exchange rates on: • the current account of the balance of is not a universal recommendation. Check the syllabus scope, assumptions, units and the limits of the evidence before generalising.

Competitive depreciations/devaluations and their consequences.

Use g - competitive depreciations/devaluations and their consequences to connect the rule to the data and decision in the question.

This matters because g - competitive depreciations/devaluations and their consequences determines what can be inferred or chosen; begin with the stated conditions and keep the conclusion tied to the evidence.

Example: apply g - competitive depreciations/devaluations and their consequences to one small, clearly defined case, show the key step or comparison, and explain the result in words.

Boundary: g - Competitive depreciations/devaluations and their consequences is not a universal recommendation. Check the syllabus scope, assumptions, units and the limits of the evidence before generalising.

Measures of international competitiveness: competitiveness; relative productivity rates; relative unit labour costs; relative export prices.

Use a - measures of international competitiveness: competitiveness • relative productivity to connect the rule to the data and decision in the question.

This matters because a - measures of international competitiveness: competitiveness • relative productivity determines what can be inferred or chosen; begin with the stated conditions and keep the conclusion tied to the evidence.

Example: apply a - measures of international competitiveness: competitiveness • relative productivity to one small, clearly defined case, show the key step or comparison, and explain the result in words.

Boundary: a - Measures of international competitiveness: competitiveness • relative productivity is not a universal recommendation. Check the syllabus scope, assumptions, units and the limits of the evidence before generalising.

Factors influencing international competitiveness:; productivity; quality of human capital; exchange rate; wage and non-wage costs; regulations; quality of infrastructure; non-price factors.

Use b - factors influencing international competitiveness: • productivity • quality of human to connect the rule to the data and decision in the question.

This matters because b - factors influencing international competitiveness: • productivity • quality of human determines what can be inferred or chosen; begin with the stated conditions and keep the conclusion tied to the evidence.

Example: apply b - factors influencing international competitiveness: • productivity • quality of human to one small, clearly defined case, show the key step or comparison, and explain the result in words.

Boundary: b - Factors influencing international competitiveness: • productivity • quality of human is not a universal recommendation. Check the syllabus scope, assumptions, units and the limits of the evidence before generalising.

Measures to increase international competitiveness:; policies to improve education and training; investment incentives; privatisation and deregulation; measures to reduce the exchange rate of the currency; trade liberalisation.

Use c - measures to increase international competitiveness: • policies to improve education and to connect the rule to the data and decision in the question.

This matters because c - measures to increase international competitiveness: • policies to improve education and determines what can be inferred or chosen; begin with the stated conditions and keep the conclusion tied to the evidence.

Example: apply c - measures to increase international competitiveness: • policies to improve education and to one small, clearly defined case, show the key step or comparison, and explain the result in words.

Boundary: c - Measures to increase international competitiveness: • policies to improve education and is not a universal recommendation. Check the syllabus scope, assumptions, units and the limits of the evidence before generalising.

The significance of international competitiveness:; advantages for an economy of being internationally competitive; problems for an economy of being internationally uncompetitive.

Use d - significance of international competitiveness: • advantages for an economy of being to connect the rule to the data and decision in the question.

This matters because d - significance of international competitiveness: • advantages for an economy of being determines what can be inferred or chosen; begin with the stated conditions and keep the conclusion tied to the evidence.

Example: apply d - significance of international competitiveness: • advantages for an economy of being to one small, clearly defined case, show the key step or comparison, and explain the result in words.

Boundary: d - significance of international competitiveness: • advantages for an economy of being is not a universal recommendation. Check the syllabus scope, assumptions, units and the limits of the evidence before generalising.