Wage determination

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 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

Using a circular flow diagram, consider how a decrease in the rate of interest might affect output and employment levels.

Feb/March 2022

Give one example of an expenditure-switching policy?

Feb/March 2023

A country pegs its foreign exchange rate to the United States dollar within a narrow band that can be adjusted over time. What type of exchange rate is this?

Feb/March 2024

Which policy would not cause a rise in the value of a country’s currency?

Feb/March 2025

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, with the aid of diagrams, how a government would keep a fixed exchange rate in place.

May/June 2006

Identify from Fig.1 the month with the largest monthly appreciation of the Kwacha.

May/June 2008

Explain how the Marshall-Lerner condition and the J-curve effect are relevant to whether a currency devaluation succeeds.

May/June 2010

What is likely to occur if a country’s currency becomes more valuable in international markets?

May/June 2011

Suppose a country chooses to become part of a group of nations that keep fixed parities for their currencies and do not allow any limits on foreign trade and payments. What would that country need to give up in order to keep its currency at a fixed parity?

May/June 2011

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

Which action is likely to cause a rise in a country’s balance of payments deficit (disequilibrium) in the short run, but could lessen it in the long run?

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

The table sets out the annual income thresholds per person that the World Bank used to group countries by their nominal Gross National Income (GNI) in 2000 and 2010. What might account for the changes shown in the table?

May/June 2014

In an open economy, which factor is most likely to make the money supply decrease?

May/June 2015

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

May/June 2016

Which policy, if taken up by a government to lower the inflation rate, could lead to a larger deficit on the balance of payments?

May/June 2016

Country X has an open economy and a floating exchange rate. It then shifts to a fixed exchange rate. Which combination of policy changes would be the most effective in lowering inflation?

May/June 2016

Explain what could lead to a favourable movement in an economy’s terms of trade.

May/June 2016

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

A country’s balance of payments current account is in deficit. What measures could bring it back to equilibrium, assuming the Marshall-Lerner condition holds?

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

Explain, with the help of a diagram, one demand factor and one supply factor that could lead to depreciation of a foreign exchange rate.

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 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 characteristic of the Indian economy might account for the purchasing power parity exchange rate of the Rupee being much higher than its market exchange rate?

Oct/Nov 2010

A country is experiencing balance of payments disequilibrium because its current account is in long-run deficit. Which consequence of this disequilibrium will lead to inflationary pressure?

Oct/Nov 2012

Explain how an economy may record a deficit in trade in goods but still run a surplus on its current account of the balance of payments.

Oct/Nov 2012

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

Oct/Nov 2014

Explain why an increase in the money supply and rising world energy prices are treated as different causes of inflation in an economy.

Oct/Nov 2014

For many years, Japan recorded a current account surplus, but this later changed to a current account deficit. What could account for this change?

Oct/Nov 2015

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

When a government cuts the rate of direct income tax and reduces the external value of its currency, which row shows the effects of these policies?

Oct/Nov 2021

Country X has an open economy and uses a floating exchange rate. It then switches to a fixed exchange rate. Which set of policy changes would be the most effective in cutting inflation?

Oct/Nov 2021

Explain how the discovery and extraction of oil changes the productive capacity of Guyana.

Oct/Nov 2022

Which policy for cutting a current account deficit in the balance of payments might be described as an expenditure-switching policy?

Oct/Nov 2024

The diagram illustrates what happens when an effective national minimum wage (NMW) is introduced into a labour market with a profit maximising monopsonist employer. What effect does the NMW have on the deadweight welfare loss in this market?

Oct/Nov 2025

A government steps in to increase the pay of a group of workers in order to stop them being exploited. In what situation could this kind of government intervention be justified?

Oct/Nov 2025

If the supply of female labour falls, what is the likely impact on male and female wages?

Oct/Nov 2025

The average wage paid to chief executives in large companies in a country is more than 100 times the average wage received by their employees.

Oct/Nov 2025

With the aid of a diagram, Assess the significance of the supply of labour in relation to wage and employment levels for firms operating in perfectly competitive and monopsony labour markets.

Oct/Nov 2025