Balance of payments and Exchange rates

Homework
Nov 2014

(a) Explain what is meant by a current account deficit of the balance of payments. [4]

(b) Analyse why the depreciation of its currencys exchange rate may lead to a reduction in a
countrys current account deficit. [6]

Many countries have a deficit in the current account of their balance of payments but some
countries, such as China, Germany and Japan, regularly have a surplus in their current account.

(a) Explain two consequences of a current account deficit. [4] Homework

(b) Analyse what can cause a surplus in the current account of the balance of payments. [8]

May 2015

In 2013, the Singapore Government was concerned that its economy might experience a recession. It
was introducing a range of supply-side policy measures to increase productivity, avoid a recession
and achieve its other aims for the economy. It was also trying to reduce the international value of
the Singapore dollar.

(b) Explain two reasons why an economy may have a high foreign exchange rate. [4]

(a) Define exchange rate. [2]

(b) Explain two benefits of a floating exchange rate system. [4]

In class

Nov 2014

(c) Discuss whether a current account surplus is always to be regarded as desirable. [8]

May 2015

(d) Discuss whether a fall in the international value of its currency will always benefit an economy.
[8]

Chile produces a third of the worlds supply of copper. A change in demand for, or supply of, copper
affects Chiles Gross Domestic Product (GDP) and the current account position on its balance of
payments.

(d) Discuss whether a rise in demand for copper would cause Chile to experience a current account
surplus. [8]

May 2015/23

Q. 1 (g) Discuss whether a rise in Chinas Gross Domestic Product is likely to reduce Lesothos current
account deficit. [6]
Macroeconomic aims and policies
Homework
Nov 2014

(d) Discuss whether there is likely to be a conflict between the government aims of low inflation and
low unemployment. [6]

May 2015

In 2013, the Singapore Government was concerned that its economy might experience a recession. It
was introducing a range of supply-side policy measures to increase productivity, avoid a recession
and achieve its other aims for the economy. It was also trying to reduce the international value of
the Singapore dollar.

(a) Define recession.

(b) Analyse how supply-side policy measures could increase productivity. [6]

(c) Analyse why a fall in the inflation rate may reduce a countrys unemployment rate. [6]

(d) Discuss whether a rise in unemployment will cause a fall in inflation. [8]

In class:
Nov 2014

(e) Discuss whether fiscal policy, rather than monetary policy, is always a better way to bring
down the rate of inflation in an economy. [10]

May 2015

Both the annual inflation rate and the economic growth rate fell in Pakistan between 2012 and 2013.
Some economists suggested that the Government should try to lower inflation further by reducing
government spending. Lower inflation might increase economic activity and reduce unemployment.

(d) Discuss whether a decrease in government spending will reduce inflation. [8]