Economics 0455 · IGCSE · Current account of balance of payments
Current account of balance of payments — practice question
South Africa has a large number of workers who are unemployed. In recent years, South Africa’s inflation rate has stayed steady, in part because wages have also been fairly stable. If wages rise, inflation may increase, and the quantity of consumer goods bought and produced can also rise. To raise employment and cut South Africa’s current account deficit in its balance of payments, some economists argue that more foreign multinational companies (MNCs) should be encouraged to produce in South Africa.
(a)[2]
Identify two ways in which unemployment is measured.
(b)[4]
Explain two ways in which an increase in wages can cause inflation.
(c)[6]
Analyse, using a production possibility curve (PPC), the opportunity cost to an economy of producing more consumer goods.
(d)[8]
Discuss whether or not an increase in foreign MNCs will reduce a deficit on the current account of the balance of payments of a host country.
Worked solution & mark scheme
This 20-mark question has a full step-by-step worked solution and mark scheme. One marking point: “Claimant count method” …