Economics 0455 · IGCSE · Current account of balance of payments
Current account of balance of payments — practice question
In 2015, Venezuela was facing several difficulties. Even with government subsidies, rising demand meant that food shortages occurred. The drop in the global price of oil widened the deficit on the current account of the country’s balance of payments. Oil made up almost 90% of the country’s export earnings. In Venezuela, oil is produced by one large state-owned company, but the country also has many sole traders involved in other industries.
(a)[2]
Define what a ‘subsidy’ is.
(b)[4]
Explain two causes of a decline in demand for oil.
(c)[6]
Analyse the benefits of operating as a sole trader.
(d)[8]
Discuss whether a government ought to be worried about a rising deficit on the current account of its balance of payments.
Worked solution & mark scheme
This 20-mark question has a full step-by-step worked solution and mark scheme. One marking point: “A payment made by the government to firms” …