Using Fig 1.1, describe how Turkey’s current account balance changed between August 2019 and April 2020.
How could the data in Fig 1.2 be used to explain the changes in the terms of trade between August 2019 and April 2020 shown in Fig 1.3?
Consumer price inflation rose from 8.6% per annum in October 2019 to 11.4%, which lowered the international competitiveness of Turkey’s goods and services. Explain, using the concept of price elasticity of demand, how the rise in inflation has led to the change in Turkey’s current account of the balance of payments between October 2019 and April 2020 as shown in Fig 1.1.
Explain how a negative real rate of interest in Turkey will affect money’s function as
- as a standard used for deferred payment. [3]
- in the role of a store of value. [3]
Discuss, with the aid of an aggregate demand and aggregate supply diagram, whether additional cuts in Turkey’s interest rate are likely to ‘generate inflation’ or ‘speed up the economic recovery’.