Economics 0455 · IGCSE · Current account of balance of payments
Current account of balance of payments — practice question
Palau is a small island nation in the Pacific Ocean. It has been given substantial financial assistance by the US. Living standards are believed to be lower in Palau than in the US. Palau applies some of the highest tariffs in the world. These trade tariffs influence Palau’s current account within its balance of payments. In 2019, commercial bank lending to firms and households in Palau rose.
(a)[2]
Identify two components of the current account of the balance of payments.
(b)[4]
Explain two causes of differences in living standards between countries.
(c)[6]
Analyse the reasons why a country may impose tariffs on imports.
(d)[8]
Discuss whether or not an increase in commercial bank lending will increase economic growth.
Worked solution & mark scheme
This 20-mark question has a full step-by-step worked solution and mark scheme. One marking point: “trade in goods” …