Question 5
[Maximum number: 20]
'The use of tariffs is the most effective way to correct a balance of payments deficit.'
With the help of a diagram, evaluate this statement.
CAIE A-Level Economics 11.1.2 Policies & balance of payments
Practise judging how fiscal, monetary, supply-side, protectionist and exchange rate policies affect current account deficits.
How this is tested
- use tariff or quota diagrams to evaluate correction of a current account deficit
- compare contractionary, supply-side and exchange rate policies for effectiveness and costs
- explain how interest rates affect current and financial account flows under fixed rates