WHALES AS ECO: BoP

A country has a deficit on the current account of its balance of payments. What might help the country to reduce its deficit?

A a decrease in its rate of income tax

B a decrease in its tariffs

C an increase in its level of employment

D an increase in its subsidies to exporters

• A

• B

• C

• D

Why may a government seek to reduce a current account surplus on the balance of payments? A to lower inflation B to lower unemployment C to raise the economic growth rate D to raise the exchange rate

• A

• B

• C

• D

A government is faced with rising inflation. It wishes to reduce inflationary pressure while avoiding a fall in output. Which action is most likely to meet its needs?

A an increase in laws to promote competition

B an increase in taxation

C an increase in the budget surplus

D an increase in the exchange rate

• A

• B

• C

• D

Which action might be part of an expansionary economic policy?

A reducing the budget deficit

B reducing the level of government spending

C reducing the money supply

D reducing the rate of interest

• A

• B

• C

• D

The table shows selected balances from a country’s balance of payments account in 2016.

What was the country’s current account balance in 2016?

A –$3 billion

B –$10 billion

C –$18 billion

D –$20 billion

• A

• B

• C

• D

What would not be included in Germany’s balance of payments accounts?

A financial investments in Germany by Japanese banks

B foreign aid received by Germany

C the German terms of trade

D the takeover of a German company by a French company

• A

• B

• C

• D

An economy has a balance of payments surplus, which it wishes to eliminate. In order to achieve this objective, which combination of polices would be most appropriate?

A a depreciation of the currency and an increase in government spending

B an appreciation of the currency and a cut in interest rates

C an increase in the money supply and a pay freeze

D increases in both direct and indirect taxation

• A

• B

• C

• D

What is most likely to lead to a persistent surplus in a country’s current account of its balance of payments?

A a low domestic savings rate

B an undervalued exchange rate

C highly protectionist policies by other countries

D low investment income from abroad

• A

• B

• C

• D

When will the imposition of a tariff by a country on the goods and services of its major trading partners reduce the country’s expenditure on imports?

A when the income elasticity of demand for imports is greater than 1

B when the price elasticity of demand for imports is greater than 1

C when the price elasticity of demand for imports is less than 1

D when the price elasticity of supply of imports is greater than 1

• A

• B

• C

• D

What is not an example of protectionism?

A a ban on the imports of chicken products

B import tariffs on agricultural products

C maximum supermarket food prices

D strict health and safety requirements

• A

• B

• C

• D