CAIE A-Level Economics 10.2.2 Balance of Payments & Inflation

CAIE A-Level Economics 10.2.2 Balance of Payments & Inflation
Cambridge International AS & A Level Economics 9708 syllabus for exams in 2026, 2027 and 20282026–2028

Practise explaining two-way links between inflation and the current account through competitiveness, import costs and exchange rates.

How this is tested

  • explain how domestic inflation changes export competitiveness and import expenditure
  • trace imported inflation or exchange-rate adjustment from a current-account imbalance
  • judge which problem is more serious using unemployment, growth and policy consequences

Question 23

[Maximum number: 1]

The inflation rate in a country increased.
Which effect would this most likely have on the country's balance of payments?

A

an improvement in the current account balance

B

an increase in price competitiveness

C

an increase in export revenue

D

an increase in import expenditure