Labour market

Policies that a government could adopt to cut a deficit on the current account of the balance of payments include devaluation, cuts in government spending, higher interest rates and tariffs on imports. Which two of these policies would be regarded as expenditure-switching?

Feb/March 2016

A country is experiencing a large current account deficit. Its government chooses to devalue its currency. Under which condition would this action reduce the deficit? (table shows price elasticity of demand for exports and imports)

Feb/March 2017

For what reasons might a government want to reduce a surplus on the current account of the balance of payments?

Feb/March 2019

Which change would cause an instant reduction in the current account deficit in the balance of payments?

Feb/March 2020

A country that uses a fixed exchange rate and has a deficit on the current account of its balance of payments moves into recession. It then devalues its currency in an attempt to put right its balance of payments. Under which conditions is the deficit most likely to improve?

Feb/March 2020

A country is experiencing a deficit on the current account of its balance of payments. What could assist the country in reducing this deficit?

Feb/March 2021

Which item ought to be entered in the financial account of a country’s balance of payments?

Feb/March 2021

‘Economic growth ought to be the most important macroeconomic aim.’ Discuss this view.

Feb/March 2021

‘A fall in the exchange rate can help to cut a country’s balance of payments deficit because imports become more expensive and exports become cheaper.’ What is this policy called?

Feb/March 2022

A government increases interest rates in order to improve the current account of the balance of payments. What could make this policy less effective?

Feb/March 2023

Give one example of an expenditure-switching policy?

Feb/March 2023

Evaluate the claim.

Feb/March 2023

An economy records an unemployment rate of 8%, which is 2% higher than in the previous year. At the same time, the current account deficit increased from 3% of GDP to 4% of GDP. What would be most likely to lower both unemployment and the current account deficit?

Feb/March 2024

Using a diagram, evaluate how effective expenditure-switching policies are in reducing a current account deficit on the balance of payments.

Feb/March 2025

Explain how expenditure-switching and expenditure-dampening policies differ as methods of correcting a balance of payments disequilibrium.

May/June 2007

Which policy is most likely to cut a balance of payments deficit without causing inflation?

May/June 2010

Which policy is most likely to cut a balance of payments deficit without leading to inflation?

May/June 2010

Which policy is most likely to cut a balance of payments deficit without leading to inflation?

May/June 2010

Why could a cut in domestic interest rates have a negative impact on a country’s balance of payment on current account?

May/June 2011

A nation is running a deficit on the current account of its balance of payments. What could assist the country in cutting this deficit?

May/June 2012

A country operates a fixed exchange rate. What is most likely to improve its balance of payments?

May/June 2012

A country’s currency is set by the Central Bank at a fixed rate against US dollars. If currency devaluation cannot be done, which policy could be adopted to cut a current account deficit in the balance of payments?

May/June 2012

Which government policy would be suitable for cutting both a current account surplus in the balance of payments and the inflation rate?

May/June 2012

The government of Lesotho launches a programme designed to raise exports and help firms expand by subsidising local entrepreneurs. What effect is this likely to have on incomes, the current account deficit in the balance of payments and government expenditure in Lesotho?

May/June 2012

What does the term expenditure-switching policy measure refer to?

May/June 2013

At what point is a balance of trade deficit likely to be regarded as a especially serious problem for a country?

May/June 2013

A country that operates a fixed exchange rate records a balance of payments surplus. Which policy action would allow it to keep its exchange rate at the intended level?

May/June 2013

Explain how a change in a country’s exchange rate might reduce a deficit on the current account of its balance of payments.

May/June 2013

An economy is experiencing a balance of payments trade surplus together with a high inflation rate. What action would be suitable for a government to take?

May/June 2013

An economy records a balance of payments trade surplus and a high rate of inflation. Which action would be suitable for a government to take?

May/June 2013

Policies used to reduce a balance of payments deficit are split into two groups: expenditure-dampening policies and expenditure-switching policies. Which pair of policies in the table is classified correctly?

May/June 2014

The central bank of the US increases its interest rate in order to improve its balance of payments position. The diagram illustrates the resulting changes in the demand for, and supply of, US$ in the foreign exchange market. How should curves W, X, Y and Z be labelled to show the impact of the interest rate rise on the exchange rate? (Assume a change is shown by a move from a curve numbered 1 to a curve numbered 2.)

May/June 2014

Explain the factors that may lead an economy to run a current account deficit.

May/June 2014

In a fixed exchange rate economy, which policy mix is most likely to be effective in dealing with both a widening current account deficit in the balance of payments and increasing inflationary pressure?

May/June 2015

Which policy measure is an expenditure-switching measure intended to cut a current account surplus?

May/June 2016

To reduce a balance of trade deficit, the government of Indonesia has chosen to use expenditure-dampening policies. Which policy would best match this description?

May/June 2016

A country operating a fixed exchange rate has a surplus on its current account within the balance of payments. Which action is most likely to cut this surplus?

May/June 2017

Policies used to reduce a balance of payments deficit are divided into two groups: expenditure-dampening policies and expenditure-switching policies. Which pair of policies is classified correctly?

May/June 2017

Over the short term, which policy action would be likely to cut a country’s balance of payments deficit while raising its inflation rate?

May/June 2017

Which policy is least likely to help in reducing a balance of payments deficit?

May/June 2018

In 2012, China recorded a current account surplus of US$155 billion. Which mix of policies could the Chinese Government adopt to cut this surplus?

May/June 2018

If an economy has a continuing balance of trade deficit, it may decide to impose tariffs on imports of manufactured goods. Under what conditions could tariffs eliminate a balance of trade deficit in the long term?

May/June 2018

An economy records a balance of payments trade surplus and a high rate of inflation. Which action would the government be most likely to take?

May/June 2018

In a country where unemployment is low and the exchange rate is managed by floating, the balance of payments shows a current account deficit that continues over time. Which policy aimed at cutting this deficit is most likely to leave unemployment low, but lead to inflation?

May/June 2019

Why can a balance of payments deficit be a potential problem for an economy operating a fixed exchange rate?

May/June 2020

Which policy measure counts as an expenditure-switching measure intended to lower a current account surplus?

May/June 2020

A country lowers the value of its currency to improve the current account of its balance of payments. The effect of this policy is shown. What is the most likely reason for the shift from X to Y?

May/June 2021

A country uses a fixed exchange rate system, yet it is now facing high unemployment and a deficit on the current account of its balance of payments. Which pair of policies would be most likely to improve both unemployment and the current account of the balance of payments?

May/June 2021

When a government devalues its fixed exchange rate, what is it most likely trying to achieve?

May/June 2021

Which policy, intended to reduce a balance of trade deficit, is classed as an expenditure-reducing policy?

May/June 2021

A country has a balance of trade deficit. In which circumstance would a depreciation of its currency be least likely to reduce this deficit?

May/June 2021

A central bank in an economy chooses to increase interest rates so that it can draw in capital inflows and strengthen the financial account of the balance of payments. In which situation is the central bank’s decision least likely to work?

May/June 2022

A country's government is concerned by a large deficit on the current account in its balance of payments and by a rising inflation rate. The country's currency is kept at a fixed exchange rate. Which policy measure is most likely to enable the government to cut the current account deficit and bring down the inflation rate?

May/June 2022

In a country where unemployment is low and the exchange rate is managed by a floating system, the balance of payments shows a continuing current account deficit. Which policy used to cut this deficit is most likely to leave unemployment low, but result in inflation?

May/June 2022

Which policy measure used to correct a balance of payments current account deficit would be classified as an expenditure-reducing policy?

May/June 2022

Explain why some countries repeatedly run a deficit on the current account of the balance of payments.

May/June 2022

Which mix of policies would be most effective in cutting a balance of payments current account surplus?

May/June 2023

A government aims to lessen the deficit in the secondary income component of its current account. Which policy would be the most effective?

May/June 2023

A nation recorded a current account surplus of $141bn. Which policy might its government use to cut this surplus in the short term?

May/June 2023

Explain, with the aid of a circular flow of income diagram, how equilibrium is established in an open economy, and consider whether a budget deficit or a trade deficit is more likely to create lasting disequilibrium.

May/June 2023

A rise in a government’s budget surplus will push up unemployment in the short run, but it will also make it easier to manage a balance of payments deficit on the current account in the long run. Evaluate this statement.

May/June 2023

Demand for a country’s exports is price elastic. If it has a deficit on the current account of its balance of payments, which policy mix is most likely to remove the deficit?

May/June 2024

Which option is not an example of an expenditure-reducing policy?

May/June 2024

A government’s macroeconomic aim is to change the current account of the balance of payments from a deficit to a surplus. To do this, it devalues the currency. In what condition would a devaluation of the currency succeed in achieving this aim?

May/June 2024

Which of the following is not an example of an expenditure-reducing policy?

May/June 2024

A country is running a deficit on the current account of its balance of payments. Which policy decision could lower the deficit?

May/June 2025

Which of the following is not one of the functions of the International Monetary Fund (IMF)?

May/June 2025

Which of the following is not a function of the International Monetary Fund (IMF)?

May/June 2025

Which policy would be most likely to help reduce a deficit on the current account of the balance of payments?

Oct/Nov 2009

During 2008, the Chinese government faced pressure from other countries to cut its current account surplus in the balance of payments. Which combination of Chinese measures would be likely to reduce China’s current account surplus?

Oct/Nov 2010

In 2008, the Chinese government faced pressure from other countries to cut its current account surplus on its balance of payments. Which combination of Chinese measures would be likely to reduce China’s current account surplus?

Oct/Nov 2010

The table lists balance of payments items for countries A, B, C and D. Official Financing, including changes in reserves, is left out of the Financial Account. Which country has the largest disequilibrium in its balance of payments?

Oct/Nov 2011

At the start of a particular period, a country aims to improve the current account of its balance of payments by devaluing its currency. The impact of this policy over the next two years is illustrated in the diagram. Which statement is likely to account for this outcome?

Oct/Nov 2011

A government thinks it can cut its trade deficit by imposing a tax on its principal export. Under what circumstances would this be most likely to be effective?

Oct/Nov 2012

Why might a government want to cut a surplus on the current account of the balance of payments?

Oct/Nov 2013

A country has experienced a persistent current account deficit in the balance of payments. Its government had been following an expenditure switching policy, but now plans to move to an expenditure reducing policy. What might the former policy have been, and what would the new policy be?

Oct/Nov 2013

An economy is experiencing a high unemployment rate and a large deficit on the current account of the balance of payments. What policy would be appropriate for the government to adopt?

Oct/Nov 2013

What would be the most likely way to reduce the deficit on a country’s current account in its balance of payments straight away?

Oct/Nov 2013

Explain, with the help of a diagram, how an expenditure dampening policy in an economy would change aggregate demand, prices and output in that economy.

Oct/Nov 2013

Why can a balance of payments deficit be a possible issue for an economy that uses a fixed exchange rate?

Oct/Nov 2014

To cut a deficit in the current account of the balance of payments, a government sets a cap on the foreign exchange that its households and firms are allowed to buy. Why might this cause the country’s inflation rate to rise?

Oct/Nov 2014

Why could a fall in domestic interest rates negatively affect a country’s balance of payments on the current account?

Oct/Nov 2014

Which policy used to reduce a balance of payments deficit is classified as an expenditure dampening policy?

Oct/Nov 2014

During a recession, a government chose to sell a state-owned industry that was making a loss to a foreign private company. What is the most likely short-term outcome?

Oct/Nov 2015

A government lowers the value of its exchange rate. What is most likely to be its objective?

Oct/Nov 2015

Explain how a rise in the quantity of money in an economy and a fall in an economy’s exchange rate can each lead to inflation.

Oct/Nov 2015

Which policy would be the most effective for a country in cutting a balance of payments deficit?

Oct/Nov 2016

A government wishes to use trade protection both to improve its trade performance and to increase government revenue. Which policy will enable it to do this?

Oct/Nov 2016

If an economy operates a floating exchange rate, which policy could produce an expansionary effect on national income while causing the smallest fall in a current account surplus in the balance of payments?

Oct/Nov 2017

Under what conditions will a country’s balance of payments current account deficit be reduced?

Oct/Nov 2017

Imagine a country with an inflation rate far under its target level, a high level of unemployment and a substantial balance of payments deficit. What would an economic advisor to the government be most likely to advise?

Oct/Nov 2017

Describe the four parts of the current account of the balance of payments. Explain what could lead to a deficit in this account.

Oct/Nov 2017

A country has experienced a current account deficit on the balance of payments for a long time. The government was applying an expenditure-switching policy, but it now intends to move to an expenditure-reducing policy. What might the former policy have been, and what might its new policy be?

Oct/Nov 2018

An economy is experiencing a balance of payments surplus that it wants to remove. To meet this aim, which mix of policies would be most suitable?

Oct/Nov 2019

What policy could be used to cut a deficit in the balance of payments?

Oct/Nov 2019

Explain the likely causes of a deficit on the current account of the balance of payments for an economy that depends heavily on agricultural products.

Oct/Nov 2019

An economy has a deficit on the current account of its balance of payments. What could the economy do in order to fund this deficit?

Oct/Nov 2021

If the demand for a country’s exports is price-elastic, and its government then introduces export subsidies, what impact will this have on the balance of trade and on the terms of trade?

Oct/Nov 2021

Which government measure is most likely to help cut both a current account surplus in the balance of payments and the inflation rate?

Oct/Nov 2021

The International Monetary Fund (IMF) provides loans to developing countries, but in return these countries must reduce existing restrictions on imports, concentrate on the export of primary goods and accept a devaluation of their currencies. Using the information above, assess whether developing countries ought to continue borrowing money from the IMF.

Oct/Nov 2021