Economics 9708 · AS & A Level · Balance of payments

Balance of payments — practice question

The diagram illustrates the market for fresh fruit in an economy. Fruit has a positive income elasticity of demand and is largely imported. The initial equilibrium is at X. What is the most probable reason for the equilibrium shifting from X to Y?

  • Aa fall in real income and a depreciation of the exchange rate
  • Ba fall in real income and an appreciation of the exchange rate
  • Ca rise in real income and a depreciation of the exchange rate
  • Da rise in real income and an appreciation of the exchange rate

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