CAIE A-Level Economics 6.3.3 Causes of Current Account Imbalances

CAIE A-Level Economics 6.3.3 Causes of Current Account Imbalances
Cambridge International AS & A Level Economics 9708 syllabus for exams in 2026, 2027 and 20282026–2028

Practise tracing deficits or surpluses to relative inflation, productivity, exchange rates, domestic and foreign income, saving, investment and the composition of trade.

How this is tested

  • link higher relative inflation or weaker productivity to lost export competitiveness and more imports
  • explain how an undervalued currency, high saving or export-led growth can sustain a surplus
  • evaluate whether a deficit reflects harmful consumption or productivity-raising capital imports

Question 27

[Maximum number: 1]

What is most likely to lead to a persistent surplus in a country's current account of its balance of payments?

A

a low domestic savings rate

B

an undervalued exchange rate

C

highly protectionist policies by other countries

D

low investment income from abroad