Current account of balance of payments — practice question

Study the source material closely before you answer Question 1. Source text: Developments in Jordan’s economy and population In 2020, Jordan recorded a deficit on the current account of its balance of payments. This deficit helped to reduce Jordan’s total demand in that year. This weaker total demand was the main reason that the number of workers exceeded the number of jobs available. Employment declined in most of Jordan’s industries. Tourism is one of Jordan’s key industries. In recent years, some Jordanian tourism firms have merged. These mergers pushed down the prices of some holidays and improved their quality. Jordan’s population keeps rising. The main cause is net immigration, although the birth rate is also higher than the death rate. Table 1.1 presents the birth rate and average age in six countries in 2020. Changes in a country’s population size influence the market for many products, including clothing. A rise in population also increases pressure on the country’s energy sources. The Jordanian government has several major renewable energy projects and intends to spend even more on these projects. Greater dependence on renewable energy, such as wind and solar power, can cut environmental harm and may be comparatively inexpensive in the long term. However, most renewable energy generators, including hydroelectric power stations, are costly to construct. In addition, wind turbines and solar panels depend on suitable weather conditions. Some of the Jordanian government’s spending is paid for by borrowing. At the start of 2021, the Jordanian central bank was expected to increase the rate of interest. This was because total demand was forecast to rise and positive economic growth was expected to return. A higher interest rate could influence Jordan’s foreign exchange rate and investment.