Economics 2281 · O Level · Current account of balance of payments
Current account of balance of payments — practice question
Palau is a small island state in the Pacific Ocean. It has benefited from substantial financial aid from 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 of its balance of payments. During 2019, commercial bank lending to firms and households in Palau rose.
(a)[2]
Identify two parts of the current account in the balance of payments.
(b)[4]
Explain two reasons for disparities in living standards between countries.
(c)[6]
Analyse the reasons why a country may impose tariffs on imports.
(d)[8]
Discuss whether or not a rise 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 physical goods” …