Economics 2281 · O Level · Current account of balance of payments
Current account of balance of payments — practice question
South Africa has a large pool of unemployed workers. In recent years, South Africa’s inflation rate has been steady, partly because wages have been relatively stable. When wages rise, this can lead to inflation and can increase the quantity of consumer goods that are bought and produced. To raise employment and reduce the deficit on the current account of South Africa’s balance of payments, some economists argue that more foreign multinational companies (MNCs) should be encouraged to produce in South Africa.
(a)[2]
Identify two methods used to measure unemployment.
(b)[4]
Explain two ways in which a rise in wages can lead to inflation.
(c)[6]
Analyse, using a production possibility curve (PPC), the opportunity cost to an economy when it produces more consumer goods.
(d)[8]
Discuss whether or not a rise in foreign MNCs will cut 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” …