Economics 0455 · IGCSE · Current account of balance of payments
Current account of balance of payments — practice question
Madagascar’s central bank steps in within the country’s foreign exchange market. Even so, Madagascar operates mainly as a market economic system. About 70% of Madagascar’s population live in poverty. Most of the nation’s industries are labour-intensive. In 2020, Madagascar recorded economic growth of 6% and a deficit on the current account of its balance of payments of $0.6bn.
(a)[2]
Define what is meant by foreign exchange market.
(b)[4]
Explain two reasons why a firm may choose labour-intensive production.
(c)[6]
Analyse how the macroeconomic objectives of economic growth and balance of payments stability might clash.
(d)[8]
Discuss whether a high level of poverty is likely to be present in a market economic system.
Worked solution & mark scheme
This 20-mark question has a full step-by-step worked solution and mark scheme. One marking point: “A venue or system for exchanging currencies” …