(a)[2]
Describe the roles of an entrepreneur in the production process.
(b)[2]
When Latvia joined the EU, it became part of a customs union. In what way does a customs union differ from a free trade area?
(c)[4]
Because of the global financial crisis in 2007–2008 there was a major capital outflow from Latvia. Use a supply and demand diagram to show how the exchange rate against the euro was kept at the level shown in Fig. 1.1.
(d)
- Explain what is meant by the term ‘budget deficit’. [2]
- Analyse, using a diagram, how fiscal measures designed to cut the budget deficit could be used by the Latvian government to reduce the relatively high rate of inflation. [4]
(e)[6]
Discuss whether it is better for Latvia to specialise in banking services rather than having a more diversified economy.