(a)[8]
An economy changes from a deficit to a surplus on the current account of the balance of payments. Explain what is meant by a surplus on the current account of the balance of payments and consider the possible impact on the level of employment and prices when there is a shift from a deficit to a surplus current account balance in an economy.
(b)[12]
Discuss whether expenditure-reducing or expenditure-switching policies are more likely to bring greater overall benefit if they are adopted to eliminate a persistent deficit on the current account of the balance of payments.