Question 30
[Maximum number: 1]
Why may a government seek to reduce a current account surplus on the balance of payments?
A
to lower inflation
B
to lower unemployment
C
to raise the economic growth rate
D
to raise the exchange rate
CAIE A-Level Economics 6.5 Policies to Correct Current Account Imbalances Question Bank
Practise comparing expenditure-reducing, expenditure-switching, protectionist and supply-side policies for current-account imbalances and evaluating their time horizon and costs.
Exam points
- trace higher taxes or interest rates to lower domestic demand and import expenditure
- explain tariffs, quotas, depreciation or export subsidies as expenditure-switching measures
- evaluate long-run productivity and investment policies against retaliation, inflation and fiscal cost
Covered syllabus points
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