(a)
- Using a diagram, explain one possible reason for the fall in the price of oil shown in Fig. 1. [2]
- Explain how the fall in the price of oil has led to the fall in the value of the peso shown in Fig. 2. [2]
(b)[4]
Using production possibility curve diagram(s), explain how the ‘peace dividend’ might help to increase the growth of Colombia’s economy.
(c)[6]
Use the information to explain how each component of aggregate demand in Colombia has been affected by the fall in the price of oil.
(d)[6]
The fall in the value of the Colombian peso shown in Fig. 2 is expected to narrow Colombia’s current account deficit. Discuss any factors that will decide whether the fall in the value of the peso will have this effect.