Economics 0455 · IGCSE · Current account of balance of payments
Current account of balance of payments — practice question
The 2018 election of a new president in South Africa improved both business confidence and consumer confidence. Even though total demand rose, inflation rates declined. One government policy introduced special areas called economic zones, in which firms pay lower taxes, or no taxes at all. These zones are intended to help domestic firms become more internationally competitive, which may cut the deficit on South Africa’s current account in the balance of payments.
(a)[2]
State two components of the current account.
(b)[4]
Explain why inflation may fall even when there is an increase in total demand.
(c)[6]
Analyse how a country’s current account deficit could be reduced if its firms become internationally competitive.
(d)[8]
Discuss whether lower taxes on firms will be beneficial for an economy.
Worked solution & mark scheme
This 20-mark question has a full step-by-step worked solution and mark scheme. One marking point: “Goods trade component” …