Economics 9708 · AS & A Level · Balance of payments

Balance of payments — practice question

A government establishes a target for the annual inflation rate of no more than 3%. Under which circumstances would it be hard to meet this target?

  • Aif devaluation of the currency leads to a trade surplus
  • Bif interest rates are increased to control effective demand
  • Cif the government increases its tax revenue
  • Dif wage increases are kept in line with productivity

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