The central bank of Madagascar steps in within the country’s foreign exchange market. Even so, Madagascar mainly operates a market economic system. Almost $70\%$ of Madagascar’s population live in poverty. A large share of the nation’s industries are labour-intensive. In 2020, Madagascar recorded an economic growth rate of $6\%$ and a current account deficit on its balance of payments of $0.6bn.
(a)[2]
Define the foreign exchange market.
(b)[4]
Explain two reasons why a firm may choose labour-intensive production.
(c)[6]
Analyse how the macroeconomic aims of economic growth and balance of payments stability may conflict.
(d)[8]
Discuss whether a high level of poverty is likely, or not, 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 market or place where currencies are exchanged” …