CAIE A-Level Economics 6.5.2 Policies for current account imbalances

CAIE A-Level Economics 6.5.2 Policies for current account imbalances
Cambridge International AS & A Level Economics 9708 syllabus for exams in 2026, 2027 and 20282026–2028

Practise selecting policies for current-account imbalances and judging their effects on imports, exports, budgets and inflation.

How this is tested

  • determine which fiscal, monetary or protectionist policy reduces a deficit
  • explain how tariffs, quotas or subsidies affect imports, exports and the budget
  • evaluate supply-side policies as long-run solutions to persistent deficits

Question 30

[Maximum number: 1]

A country has a current account deficit on its balance of payments. The government also has a budget deficit.

Which measure to reduce the current account deficit will increase the budget deficit?

A

depreciating the exchange rate

B

introducing quotas on imports

C

raising tariffs on imports

D

subsidising exports