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Topical›Economics 9708›International economic issues (AS Level)›Current account of the balance of payments›Paper 1

Current account of the balance of payments — Paper 1 · A Level Economics 9708

6.3· 257 questions · 257 marks · 308 min · 2005–2025· Multiple choice

Every Cambridge A Level Economics Paper 1 question on current account of the balance of payments, laid out as 66 A4 pages with the mark scheme below. Nothing is left out. Free to read, no account.

QuestionsMark scheme
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Questions66 pages

Question 1: What is an export of services in Jamaica’s current account? A an inflow of funds to Jamaica to buy shares B earnings from US tourists visit…Question 2: A Japanese company builds a factory in the UK to supply both the UK market and the market in the rest of Europe. What is likely to be the l…Question 3: Why is a balance of payments deficit a potential problem for an economy with a fixed exchange rate? A Domestic money supply will increase. …Question 4: The table refers to a particular country. index of import index of export year prices prices (2000 = 100) (2000 = 100) 1995 48.1 57.0 2005 …Question 5: What will improve Cuba’s current account balance immediately? A a Cuban buying sports equipment produced in the US B a US resident investin…1 / 66
Question 6: What might explain an increase in the volume of a country’s imports? A an appreciation of the country’s exchange rate B an increase in the …Question 7: A country’s terms of trade index currently stands at 120 (base year 2000). Since 2000, the average price of its imports has increased by 25…Question 8: The diagram shows the UK trade balance with China and Japan in 2003 and 2004. 2400 imports from China 2200 imports from Japan 2000 1800 160…Question 9: The table shows items from the balance of payments for countries A, B, C and D. Official Financing is excluded from the Financial Account. …2 / 66
Question 10: A country’s terms of trade increased from the base year value of 100 to 120 in the following year. Which behaviour of export prices and imp…Question 11: The table shows the balance for four items in a country’s current account for two years. visibles invisibles income transfers year 1 –72 84…Question 12: In which situation must a country’s balance of trade in goods and services improve? A Export orders rise more than import orders. B Export …Question 13: When must the terms of trade of a country change? A when the volume of exports falls and the volume of imports rises B when the total value…3 / 66
Question 14: The table shows all of the items on the current account of a country’s balance of payments. $ million exports of goods 143 imports of goods…Question 15: A UK resident buys shares in a Spanish company. What will be the immediate and subsequent effects on the UK’s balance of payments? immediat…Question 16: There is a rise in the exchange rate of the US$. Which would cause the greatest increase in the US current account deficit? A a high level …Question 17: Which item is recorded in the financial account of a country’s balance of payments? A a receipt of a gift of cash from abroad B a receipt o…4 / 66
Question 18: What is the likely effect on the volume of exports and imports if a country with a fixed exchange rate experiences a higher rate of inflati…Question 19: In 2004, when international demand for oil was high, Bolivia encouraged investment by foreign firms in order to exploit its oil and gas res…Question 20: The table shows observations of the exchange rate of an economy and its current account balance over six years. exchange rate current accou…Question 21: A country has a current account deficit. Which component of its current account balance will be made less favourable as a direct result of …5 / 66
Question 22: In which situation must the terms of trade be moving in a country’s favour? A Its import prices are rising at a slower rate than its export…Question 23: The diagram shows Australia’s exports to and imports from four trade partners in $billion in 1994 and 2004. Australia’s exports and imports…Question 24: A country succeeds in attracting foreign direct investment. How is its effect recorded in its balance of payments in the short run and long…Question 25: Since 2000 a country’s export prices have increased on average by 50 % and its import prices by 25 %. What is the current figure for the co…6 / 66
Question 26: A developed country has a price-inelastic demand for oil, all of which it imports. The oil-producing countries decide to provide more oil t…Question 27: Why is it that a country’s balance of payments must always balance? A Exchange rate changes will correct any deficit or surplus. B One coun…Question 28: The table shows the balances for four items in a country’s current account on the balance of payments for two years. current visible invisi…Question 29: The table gives details of some parts of a country’s balance of payments. In which year did the country have its largest visible trade defi…7 / 66
Question 30: The table shows indicators of a country’s economic performance over a two-year period. balance of trade in exchange volume of volume of yea…Question 31: The table shows the balances for four items in a country’s current account on the balance of payments for two years. current visible invisi…Question 32: The table gives details of some parts of a country’s balance of payments. In which year did the country have its largest visible trade defi…8 / 66
Question 33: The table shows indicators of a country’s economic performance over a two-year period. balance of trade in exchange volume of volume of yea…Question 34: The table shows the balance in $ million for four items in a country’s current account for two years. visibles invisibles income transfers …Question 35: What would identify a country with a balance of payments disequilibrium? A alternate annual deficits and surpluses in the current account B…Question 36: The table shows the balance in $ million for four items in a country’s current account for two years. visibles invisibles income transfers …9 / 66
Question 37: When is a deficit on the current account of the balance of payments likely to worsen? A when the government adopts a deflationary macroecon…Question 38: What would identify a country with a balance of payments disequilibrium? A alternate annual deficits and surpluses in the current account B…Question 39: The table shows the balance in $ million for four items in a country’s current account for two years. visibles invisibles income transfers …Question 40: What would identify a country with a balance of payments disequilibrium? A alternate annual deficits and surpluses in the current account B…Question 41: A government has low reserves of foreign currency. When would it be likely to consider a deficit on current account to be a serious problem…10 / 66
Question 42: A government has low reserves of foreign currency. When would it be likely to consider a deficit on current account to be a serious problem…Question 43: In a country the Marshall-Lerner condition for an improvement in the trade balance is satisfied in the long run, but quantities of imports …Question 44: A government has low reserves of foreign currency. When would it be likely to consider a deficit on current account to be a serious problem…Question 45: A country’s terms of trade currently stands at 150 (base year 2000 = 100). Since 2000 the average price the country has received for its ex…Question 46: A government wishes to present its final balance of payments account. It has calculated the current account balance, the capital account ba…11 / 66
Question 47: A Japanese company builds a factory in the UK to supply both the UK market and the market in the rest of Europe. What is likely to be the l…Question 48: A country experiences changes in the value of its exports and imports of goods and services and its inflow of incomes and transfers. These …Question 49: The table shows observations of the exchange rate of an economy and its current account balance over six years. exchange rate current accou…12 / 66
Question 50: A country’s terms of trade currently stands at 150 (base year 2000 = 100). Since 2000 the average price the country has received for its ex…Question 51: A government wishes to present its final balance of payments account. It has calculated the current account balance, the capital account ba…Question 52: A Japanese company builds a factory in the UK to supply both the UK market and the market in the rest of Europe. What is likely to be the l…Question 53: A country experiences changes in the value of its exports and imports of goods and services and its inflow of incomes and transfers. These …Question 54: A country’s terms of trade currently stands at 150 (base year 2000 = 100). Since 2000 the average price the country has received for its ex…13 / 66
Question 55: A government wishes to present its final balance of payments account. It has calculated the current account balance, the capital account ba…Question 56: A Japanese company builds a factory in the UK to supply both the UK market and the market in the rest of Europe. What is likely to be the l…Question 57: A country experiences changes in the value of its exports and imports of goods and services and its inflow of incomes and transfers. These …Question 58: Which combination of export and import prices will cause the greatest change in a country’s terms of trade? export prices import prices A d…14 / 66
Question 59: An Indian multinational company receives profits from its factories based in the UK. It then buys a US-owned firm based in the UK. How will…Question 60: Which combination is likely to result from demand-pull inflation? balance of trade profits A improving falling B improving rising C worseni…Question 61: In 2008-9 American households reduced their consumption of domestic and imported goods and used part of the money to pay back some of their…Question 62: In 2004, when international demand for oil was high, Bolivia encouraged investment by foreign firms in order to exploit its oil and gas res…15 / 66
Question 63: The table shows all of the items on the current account of a country’s balance of payments. $ million exports of goods 143 imports of goods…Question 64: The table shows items from the balance of payments for countries A, B, C and D. Official Financing including changes in reserves is exclude…Question 65: What must be the necessary result of a surplus in the current account of a country’s balance of payments? A a depreciation of the currency …Question 66: Which combination of export and import prices will cause the greatest change in a country’s terms of trade? export prices import prices A d…16 / 66
Question 67: An Indian multinational company receives profits from its factories based in the UK. It then buys a US-owned firm based in the UK. How will…Question 68: In 2008-9 American households reduced their consumption of domestic and imported goods and used part of the money to pay back some of their…Question 69: In 2004, when international demand for oil was high, Bolivia encouraged investment by foreign firms in order to exploit its oil and gas res…Question 70: A firm borrows money from a bank based abroad in order to pay a lower rate of interest than that available from banks in its own country. W…Question 71: A firm borrows money from a bank based abroad in order to pay a lower rate of interest than that available from banks in its own country. W…17 / 66
Question 72: A country has a fixed exchange rate. What is likely to result in an improvement in its balance of payments? A a decrease in interest rates …Question 73: The diagram shows the UK trade balance with China and Japan in 2003 and 2004. 2400 imports from China 2200 imports from Japan 2000 1800 160…Question 74: The UK experienced a growing deficit in its trade in goods during 2003 to 2007 but it also had a stable exchange rate. What could have expl…18 / 66
Question 75: Russia is a significant exporter of wheat. In 2010 there was a poor harvest and the Russian government stopped all exports of wheat to ensu…Question 76: Two industries in a country are fishing and tourism. The international exchange rate of the country’s currency fell in 2010. If there were …Question 77: The diagram shows Australia’s exports to and imports from four trade partners in $billion in 1994 and 2004. Australia’s exports and imports…19 / 66
Question 78: The table shows in millions of US$ the balance for four items in a country’s current account for two years. goods services income transfers…Question 79: The table shows the Canadian current account of the balance of payments in 2005 and 2006. 2005 2006 ($m) ($m) goods 62 372 –4 568 services …Question 80: What is most likely to result from a rising deficit in a country’s balance of payments from increased imports of consumer goods? A a rise i…Question 81: Between 2005 and 2010, a country’s import prices rose by 25 % and its terms of trade rose to 120 (2005 = 100). Which change has there been …20 / 66
Question 82: The table shows some of the elements of aggregate demand in selected countries in US$ in 2009. consumer expenditure aggregate demand + inve…Question 83: The table gives information about the trade between Singapore and New Zealand during 2001, the first year after they signed a free trade ag…Question 84: The table shows the balances for four items in a country’s current account on the balance of payments for two years. current goods services…21 / 66
Question 85: If a country succeeds in attracting foreign direct investment in a single year, what is the result on its balance of payments in the short …Question 86: Since 2000 a country’s export prices have increased on average by 50% and its import prices by 25%. What is the current figure for the coun…Question 87: When is a balance of trade deficit likely to be considered a particularly difficult problem for a country? A when the imported goods are id…Question 88: In spring 2011 the US$ exchanged for 81.6 yen. In spring 2012 the US$ exchanged for 76.1 yen. What would be expected to rise for the United…Question 89: A country’s terms of trade increased from the base year value of 100 to 120 in the following year. What changes in export prices and import…22 / 66
Question 90: The balance of payments accounts are arranged in the following way. Which total is the current account balance? balance of trade in goods +…Question 91: Which item that relates to a Japanese-owned car assembly plant in the US will not be recorded in the current account of the balance of paym…Question 92: 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…Question 93: A UK resident buys shares in a Spanish company. What will be the immediate and subsequent effects on the UK’s balance of payments? immediat…23 / 66
Question 94: The table gives details of some parts of a country’s balance of payments. In which year did the country have its largest trade deficit? val…Question 95: What is not an item in a country’s current account of its balance of payments? A exports of primary commodities B money received from banki…Question 96: What combination is most likely to cause a surplus in a country’s trade in goods and services? international value rate of inflation of cur…Question 97: The diagram shows demand and supply curves of the £ sterling against the US dollar. S price of £ sterling in US dollars D2 S D1 O quantity …24 / 66
Question 98: A US company receives a US$20 million dividend from shares that it owns in a Brazilian company. How would this dividend be shown in the bal…Question 99: What would lead a country to move from a surplus to a deficit on the current account of the balance of payments? A a depreciating exchange …Question 100: The table shows details on the Gross Domestic Product (GDP) and the balance of payments of four countries. Which country had the largest ne…Question 101: Why is a deficit on the current account of the balance of payments in economies with freely floating exchange rates often thought to be an …Question 102: In which situation must a country’s balance of trade in goods and services improve? A Export costs rise more than import costs. B Export pr…25 / 66
Question 103: What must be the result for a country of a rise in its export prices relative to its import prices? A a deficit in its trade in goods B an …Question 104: A country imports components which it uses in the production of electrical goods for the domestic market. The country is experiencing a ris…Question 105: Which international transaction is correctly matched to the part of the balance of payments account in which it is recorded? transaction pa…Question 106: What might explain an increase in the volume of a country’s imports? A an appreciation of the country’s exchange rate B an increase in the …Question 107: What is the most likely consequence of an increase in a country’s balance of payments deficit? A an increase in the foreign value of the cu…26 / 66
Question 108: A Japanese car manufacturer sets up a factory to produce car parts in Malaysia. How is this likely to affect Malaysia’s trade balance and i…Question 109: Why might an increase in a current account surplus cause inflation? A It will decrease aggregate supply. B It will decrease the money suppl…Question 110: In the base year, which combination of export and import price changes will have the greatest effect on the country’s terms of trade? expor…Question 111: The table shows selected balances from a country’s balance of payments accounts in 2012. $ billion trade in goods –20 trade in services +5 …27 / 66
Question 112: Between 2011 and 2013, high street retailers reported that expenditure on home-produced and imported goods was reduced. Consumers did not t…Question 113: The table shows the balance in $million for four items in a country’s current account for two years. goods services income transfers Year 1…Question 114: When is a deficit on the current account of the balance of payments likely to worsen? A when a government adopts a deflationary macroeconom…Question 115: The table gives details of the balance of trade in the US in 2011 and 2012. 2011 2012 value of goods exported (US$ millions) 1 496 000 1 56…28 / 66
Question 116: The table shows indicators of a country’s economic performance over a two-year period. balance of trade in exchange volume of volume of yea…Question 117: The table refers to a particular country. index of import index of export year prices prices (2010 = 100) (2010 = 100) 2005 48.1 57.0 2015 …Question 118: A foreign government pays a UK university to educate its students. How would this be recorded on the balance of payments current account of…29 / 66
Question 119: A Japanese company builds a factory in the UK to supply both the UK market and the market in the rest of Europe. What is likely to be the l…Question 120: A Japanese car manufacturer established a successful factory in France. How would this be shown in the Japanese balance of payments? invest…Question 121: At a time when international demand for oil was high, Bolivia encouraged investment by foreign firms in order to exploit its oil and gas re…Question 122: In a time of recession, a government decided to sell a loss-making state-owned industry to a foreign private company. What is the most like…30 / 66
Question 123: For many years, Japan had a current account surplus which then became a current account deficit. What might explain this change? A Japan ha…Question 124: What would identify a country with a fundamental balance of payments disequilibrium? A alternate annual deficits and surpluses in the curre…Question 125: If a country has a surplus in its balance of payments then its money supply is likely to A fall because more of its goods were purchased by…Question 126: In July 2013, orders for durable US manufactured goods from computers to aircraft fell 7.3%, the biggest fall for a year. What might explai…Question 127: Which policy, adopted by a government with the intention of reducing the rate of inflation, might cause a greater deficit on the balance of…31 / 66
Question 128: In August 2013, a Dutch insurer announced it wished to sell its South Korean Life Insurance group to a South Korean company for $1.65 billi…Question 129: What would cause an immediate increase in the deficit in a country’s balance of payments on the current account? A a rise in government exp…Question 130: The table shows the Canadian current account of the balance of payments in 2005 and 2006. The change in which item contributed the most to …Question 131: A country has no controls on transactions in foreign exchange and allows its exchange rate to float freely. What will always be zero? A net…32 / 66
Question 132: The table shows items from the balance of payments for countries A, B, C and D. Official financing including changes in reserves is exclude…Question 133: What might increase a surplus on the current account of New Zealand’s balance of payments? A increased earnings of Australians working in N…Question 134: How is the terms of trade index calculated? export price index A × 100 import price index export price index B × 100 quantity of exports tr…Question 135: The table contains some figures from the 2014 balance of payments account of the United States (US). US$ million exports of goods 1 632 639…33 / 66
Question 136: A country has a fixed exchange rate. What is likely to result in a deterioration in its balance of payments? A a decrease in interest rates…Question 137: The table gives the Terms of Trade Index in 2010 and 2013 for Japan and Venezuela. Terms of Trade (2000=100) 2010 2013 Venezuela 215.9 254.…Question 138: A government succeeds in changing a current account deficit into a current account surplus. Why might this current account surplus increase…34 / 66
Question 139: The diagram shows Greece’s trade position with the EU and Russia between 2005 and 2014. 60 key Greek 50 imports from EU trade 40 exports to…Question 140: There is a rise in the exchange rate of the US$. Which would cause the greatest increase in the US current account deficit? A a high level …Question 141: The table gives information about the trade between Singapore and New Zealand during 2001, the first year after they signed a free trade ag…35 / 66
Question 142: An Indian multinational company receives profits from its factories based in the UK. It then buys a US-owned firm based in the UK. How will…Question 143: In 2014 a rich foreign businessman bought a UK football club. What would have been the immediate effect of such an investment? A a fall in …Question 144: What does the current account of the balance of payments include? A government reserves and foreign aid B government revenue and government…Question 145: The diagram shows Greece’s trade position with the EU and Russia between 2005 and 2014. 60 Greek key trade 50 imports from EU $bn 40 export…36 / 66
Question 146: In 2014 Australia and China negotiated a trade agreement. This removed Chinese tariffs on 95% of Australian exports in exchange for greater…Question 147: The table shows the terms of trade for Saudi Arabia. date terms of trade 2000 100 2010 105 2015 137 What can be concluded from the table fo…Question 148: A country has a deficit on the current account of the balance of payments. Which policy would be expected to increase the deficit? A an app…37 / 66
Question 149: The table shows trade in goods and services for a selection of countries in 2005 and 2014. trade in goods and services (US$ millions) 2005 …Question 150: The terms of trade for a country have improved. Which combination of price behaviour would have caused this? average price average price of…Question 151: The demand for a country’s exports is price-elastic. What will be the effect of introducing export subsidies on its balance of trade and on…38 / 66
Question 152: The table shows all of the items on the current account of a country’s balance of payments. $ million exports of goods 143 imports of goods…Question 153: The table shows an extract from a country's current account of its balance of payments accounts. credits $ million export of goods G export…39 / 66
Question 154: The table shows selected items of the balance of payments of a country in 2015. $ billions net portfolio investment +40 trade in goods –100…Question 155: What is likely to explain an increase in the deficit on a country’s current account of the balance of payments? A an increase in government…Question 156: Which item is not included in the current account of a country’s balance of payments? A exports of services B interest on foreign loans C p…Question 157: The index for a country’s terms of trade changed from 100 in year 2015, to 104 in year 2016. What could have caused this change? A a fall i…40 / 66
Question 158: The balance of payments accounts are arranged in the following way. Which total is the current account balance? balance of trade in goods +…Question 159: What will definitely lead to an improvement in the terms of trade? A Export prices fall whilst import prices rise. B Export prices rise by …Question 160: The terms of trade of a developing country fell from 90 in 2010 to 80 in 2015. Assuming the index of its import prices remained constant at…Question 161: 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…41 / 66
Question 162: The table shows selected balances from a country’s balance of payments account in 2016. $US billions trade in goods –30 trade in services +…Question 163: What is not an item in a country’s current account of its balance of payments? A exports of primary commodities B money received from banki…Question 164: A British citizen buys a house in the US which he rents to American citizens in order to receive an income for himself. Where will the init…Question 165: The current account of the balance of payments for Nigeria changed from US$899 m in 2014 to US$ –15 763 m in 2015. Assuming that nothing el…42 / 66
Question 166: An Australian family purchases a holiday to New Zealand and an Australian mining company sells coal to China. Four students, A, B, C and D,…Question 167: 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 …Question 168: 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 rat…Question 169: What would not be included in Germany’s balance of payments accounts? A financial investments in Germany by Japanese banks B foreign aid re…Question 170: ‘Primary income’ and ‘secondary income’ are components of the current account of the balance of payments. What do these represent? primary …43 / 66
Question 171: A foreign government pays a UK university to educate its students. How would this be recorded on the balance of payments current account of…Question 172: An economy’s current account on the balance of payments is in surplus. The exchange rate is revalued by the government. Assume the Marshall…Question 173: Singapore imports almost all of its raw materials and its exports are a high percentage of its GDP. The price elasticity of demand for expo…44 / 66
Question 174: Which change is most likely to result in a worsening of a country’s balance of payments? A a reduction in remittances from citizens who wor…Question 175: What is the most likely consequence of an appreciation in the value of the Malaysian ringgit? A a decline in the level of unemployment in M…Question 176: What will lead to an immediate improvement in the balance of payments deficit on current account? A a fall in interest rates B a reduction …Question 177: The diagram shows Greece’s trade position with the EU between 2005 and 2014. 60 Greek trade 50 key $bn 40 imports from EU 30 exports to EU …45 / 66
Question 178: In 2018 an investor in the United States (US) purchased shares in a German bank. In December 2018 the US investor was paid a dividend on th…Question 179: The table shows the goods balance and services balance for a country in selected years. goods balance services balance year ($ billion) ($ …Question 180: Which components are included in the financial account of the balance of payments? the balancing foreign direct interest, profits item …46 / 66
Question 181: The table shows an extract from a country’s balance of payments. exports imports $ billion $ billion trade in goods 150 200 trade in servic…Question 182: A country has a deficit of $300 million on the current account of its balance of payments. It devalues its currency in an attempt to reduce…Question 183: A family takes a holiday abroad. Four students are asked to show where the cost of the accommodation would be recorded in the current accou…Question 184: When is a deficit on the current account of the balance of payments likely to worsen? A when a government adopts a deflationary macroeconom…47 / 66
Question 185: The table shows an approximate summary of the current account of the balance of payments for Thailand. Bank of Thailand current account (mi…Question 186: The table gives figures from the current account of the balance of payments for New Zealand in 2018. There are two blank spaces, X and Y, i…Question 187: A country’s terms of trade changed from 100 to 95. What is most likely to have caused this change? A a depreciation of the country’s curren…48 / 66
Question 188: Which item should be recorded in the financial account of a country’s balance of payments? A foreign aid by China to assist in infrastructu…Question 189: The figures shown are from New Zealand’s balance of payments for 2017 according to data published by Stats NZ in September 2018. NZ$m capit…Question 190: Between 2011 and 2013, retailers reported that expenditure on domestically-produced and imported goods had reduced. This was because consum…Question 191: Increased international competition leads to a worsening in a country’s current account balance. In the absence of any offsetting factors, …49 / 66
Question 192: A country with a fixed exchange rate experiences a higher rate of inflation than its trading partners. What is the likely effect on the cou…Question 193: A developed country has a price-inelastic demand for oil, all of which it imports. The oil-producing countries increase the supply of oil. …Question 194: A resident of country X buys shares in a firm in country Y. The shares then pay the resident a dividend. Where are these two flows recorded…Question 195: The balance of payments on the current account for Guatemala in 2011 was –US$1.6 bn and in 2016 was +US$1.0 bn. What is most likely to have…50 / 66
Question 196: Why is it that a country’s balance of payments must always balance? A Exchange rate changes will correct any deficit or surplus. B One coun…Question 197: The demand for a country’s exports is price-elastic. Its government introduces export subsidies. What will be the effect on its balance of …Question 198: The table shows the average changes in the prices and volumes of exports and imports. Which combination of changes would result in an incre…Question 199: The graph shows the change in the current account of Belgium’s balance of payments from 2016 to 2017. 3.6 US$ billion 0 –2.8 2016 2017 What…51 / 66
Question 200: Which item is not included in the current account on the balance of payments statement? A the balancing item B the export of services C the…Question 201: The prices of a country’s exports rise by 5% while the prices of its imports fall by 5%. What will definitely improve in the country as a r…Question 202: Why might a country’s government impose a tax on fuel exports? A to encourage domestic refineries to increase production B to improve the c…Question 203: What leads to a fall in a country’s terms of trade? A a fall in the price of exports relative to the price of imports B a fall in the price…52 / 66
Question 204: The diagram has three lines that show the values of an economy’s exports, imports and trade balance between 2011 and 2019. $m + 1 2 3 0 – 2…Question 205: In 2020, shops reported a fall in sales as domestic demand in an economy fell. However, the impact on the overall economy was not as unfavo…Question 206: The data in the table is extracted from the Singapore Balance of Payments for 2019. $m goods balance +134 000 services balance +8 000 capit…Question 207: Which change will not affect the balance of payments current account? A a rise in export and import prices B a rise in foreign aid flows C …53 / 66
Question 208: The diagrams show initial equilibrium positions at Y1P1. Which diagram reflects the impact on an economy of higher unit wage costs and an i…Question 209: The table shows information from the current account of the balance of payments for Canada and Singapore in 2019. Canada Singapore (US$ mil…54 / 66
Question 210: What is likely to explain an increase in the deficit on a country’s current account of the balance of payments? A an increase in government…Question 211: Trade in services is a component of the current account of the balance of payments. What is an example of a trade in services? A developmen…Question 212: The table shows data on the Japanese balance of trade in goods. exchange rate exports imports year yen / dollar $bn $bn 2016 109 635 585 20…Question 213: A country with a floating exchange rate experiences a large surplus on the current account of its balance of payments. What is likely to de…55 / 66
Question 214: A country experiences a fall in the value of exports and an increase in the value of imports of goods and services. What are the effects of…Question 215: The table contains some figures from the balance of payments account of the United States (US) for a given year. US$ million exports of goo…Question 216: Which combination of policies would be most effective in reducing a balance of payments current account surplus? a decrease in a devaluatio…Question 217: A government wishes to reduce the deficit on the secondary income section of its current account. Which policy would be most effective? A a…56 / 66
Question 218: A Bangladeshi citizen is employed as a construction worker in Qatar. He sends some of his wages to his family in Bangladesh. How will this …Question 219: Which item is not included in the current account of a country’s balance of payments? A exports of services B interest on foreign loans C p…Question 220: A Kenyan banker who lives and works in India sends 15% of their wage back to Kenya every month. What would be the change in the current acc…Question 221: A country’s current account deficit is larger this year than last. What is the most likely reason for this increase? A Demand for domestica…Question 222: A foreign government pays a UK university to educate its students. How would this be recorded on the balance of payments current account of…57 / 66
Question 223: An economy in equilibrium has a trade deficit of $20bn and a budget surplus of $20bn. Investment spending is $50bn. What is the total savin…Question 224: Which components are included as primary income in the current account of the balance of payments? trade current employment in goods trans…Question 225: What is the most likely cause of a current account deficit on the balance of payments? A an undervalued exchange rate B a relatively low ra…Question 226: According to the circular flow of income, what would be the immediate result of an increase in the value of a country’s exports? A imports …Question 227: The table shows an extract from a country’s balance of payments. exports imports $ billion $ billion trade in goods 150 200 trade in servic…58 / 66
Question 228: The table shows the goods balance and services balance for a country in selected years. goods balance services balance year $ billion $ bil…Question 229: What is not a likely cause of a deficit in the current account of the balance of payments? A Consumer spending is low. B Primary incomes in…Question 230: The terms of trade for a country increased from 100 to 120. Which statements are correct? 1 The terms of trade have deteriorated. 2 Fewer e…59 / 66
Question 231: The table shows the current account of a balance of payments for January 2021. $m exports of goods 15 000 imports of goods 17 000 services …Question 232: A major European economy announced that the primary income account deficit of its balance of payments changed from $20 billion to $50 billi…Question 233: What is not included in the current account of the balance of payments? A international aid B trade in goods C trade in services D foreign …Question 234: What is an export of services in Jamaica’s current account? A an inflow of funds to Jamaica to buy shares B earnings from US tourists visit…60 / 66
Question 235: The table shows the trade in goods and services for an economy between 2019 and 2021. trade in goods year and services ($ millions) 2019 –1…Question 236: Which transaction is not recorded in the current account? A aid received from the government of another country B exports of raw materials …Question 237: In which situation will a country’s terms of trade improve? A Its imports rise in value less than its exports. B Its imports rise in volume…Question 238: A country has a floating exchange rate. Its current account on the balance of payments moves from a surplus to a deficit. Which rate is lik…61 / 66
Question 239: The table shows the average price of exports and imports. Which combination of changes in export prices and import prices could result in a…Question 240: Turkey imported $220 million worth of goods and services. Turkey exported $12 million worth of goods and services during the same period. I…Question 241: What is not a valid explanation of why a government might allow a deficit on the balance of payments current account to continue? A The bal…Question 242: What is most likely to cause a current account deficit? A a recession in the domestic economy B a relatively high rate of inflation C an un…Question 243: High economic growth is often accompanied by a worsening of the current account of the balance of payments. Which reason for this trend is …62 / 66
Question 244: A country experiences a rising trade deficit and a current account surplus at the same time. Which combination of events might explain this…Question 245: Why does the value of a country’s terms of trade have no monetary units? A It cannot be calculated accurately enough. B It includes more th…Question 246: Primary income and secondary income are components of the current account of the balance of payments. Which option correctly identifies an …Question 247: 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 rat…63 / 66
Question 248: What is the most likely consequence of economic growth? A a fall in the price of raw materials B a rise in youth unemployment C a worsening…Question 249: A country has a deficit on the current account of the balance of payments. What would be expected to increase the deficit? A an appreciatio…Question 250: The table gives the terms of trade index for a country over three years. year 1 year 2 year 3 terms of trade 100 105 112 What is the most l…Question 251: The aggregate demand (AD) curve in an economy shifts to the left. What is most likely to cause this shift? A a decrease in the exchange rat…Question 252: What would not be included in the current account of the balance of payments? A income earned outside the country that is transferred into …64 / 66
Question 253: A country with a floating exchange rate has a large deficit on the current account of the balance of payments. What is most likely to decre…Question 254: What is the effect of a cut in a country‘s income tax rates on its exports and imports? exports imports A fall fall B fall unchanged C unch…Question 255: A government is planning to increase its expenditure on defence. Half of this expenditure will be on equipment such as planes and weapons w…Question 256: What is an example of primary income in the current account of the balance of payments of Pakistan? A dividends received by a Pakistani res…65 / 66
Question 257: The main export of country X is oil. The world demand for oil is price inelastic. The world supply of oil is reduced by the major oil produ…66 / 66

Mark scheme257 answers

Answers below. Sit the paper first if you are practising.

Pastlit

Economics 9708 · Current account of the balance of payments — Paper 1

A Level · topical answer key — answer key (teacher use)

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Answer

Marks

1B1
2C1
3C1
4C1
5D1
6A1
7D1
8C1
9B1
10C1
11A1
12C1
13D1
14C1
15C1
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18B1
19C1
20C1
21A1
22A1
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Pastlit

Economics 9708 · Current account of the balance of payments — Paper 1

A Level · topical answer key — answer key (teacher use)

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Marks

50B1
51C1
52B1
53B1
54B1
55C1
56B1
57B1
58C1
59A1
60D1
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Pastlit

Economics 9708 · Current account of the balance of payments — Paper 1

A Level · topical answer key — answer key (teacher use)

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Marks

99C1
100B1
101B1
102C1
103—1
104—1
105D1
106A1
107C1
108B1
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Pastlit

Economics 9708 · Current account of the balance of payments — Paper 1

A Level · topical answer key — answer key (teacher use)

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Marks

148A1
149B1
150A1
151B1
152A1
153A1
154B1
155A1
156D1
157C1
158C1
159D1
160B1
161A1
162C1
163C1
164B1
165B1
166C1
167B1
168B1
169C1
170C1
171C1
172A1
173D1
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177C1
178C1
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Pastlit

Economics 9708 · Current account of the balance of payments — Paper 1

A Level · topical answer key — answer key (teacher use)

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Answer

Marks

197B1
198A1
199C1
200A1
201D1
202C1
203A1
204B1
205A1
206B1
207D1
208B1
209C1
210A1
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212—1
213C1
214B1
215D1
216C1
217D1
218B1
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223B1
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225D1
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Pastlit

Economics 9708 · Current account of the balance of payments — Paper 1

A Level · topical answer key — answer key (teacher use)

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246C1
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Questions as text

Q1 · What is an export of services in Jamaica’s current account? 9708/11 Oct/Nov 2005

22 What is an export of services in Jamaica’s current account? A an inflow of funds to Jamaica to buy shares B earnings from US tourists visiting Jamaica C earnings of Haitian workers in Jamaica sent to Haiti D the export of Jamaican coffee

1 marks

Answer: B

This question in 9708/11 Oct/Nov 2005

Q2 · A Japanese company builds a factory in the UK to supply both the UK market and the market… 9708/11 Oct/Nov 2005

27 A Japanese company builds a factory in the UK to supply both the UK market and the market in the rest of Europe. What is likely to be the long-run impact on the UK’s balance of trade in goods and on its current balance? balance of trade current in goods balance A worsen uncertain B worsen improve C improve uncertain D improve improve

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2005

Q3 · Why is a balance of payments deficit a potential problem for an economy with a fixed… 9708/11 Oct/Nov 2005

28 Why is a balance of payments deficit a potential problem for an economy with a fixed exchange rate? A Domestic money supply will increase. B Rival producers may react with trade protection measures. C The economy’s foreign exchange reserves may run down. D The economy’s short-run standard of living will be reduced.

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2005

Q4 · The table refers to a particular country 9708/11 May/June 2006

21 The table refers to a particular country. index of import index of export year prices prices (2000 = 100) (2000 = 100) 1995 48.1 57.0 2005 122.4 120.8 Which statement about the period 1995 to 2005 is correct? A The balance of trade improved. B The balance of payments worsened. C The terms of trade worsened. D The exchange rate appreciated.

1 marks

Answer: C

This question in 9708/11 May/June 2006

Q5 · What will improve Cuba’s current account balance immediately? 9708/11 May/June 2006

22 What will improve Cuba’s current account balance immediately? A a Cuban buying sports equipment produced in the US B a US resident investing in property in Cuba C a US multi-national company building a new factory in Cuba D Cubans working in the US sending money to their relatives in Cuba

1 marks

Answer: D

This question in 9708/11 May/June 2006

Q6 · What might explain an increase in the volume of a country’s imports? 9708/11 May/June 2006

26 What might explain an increase in the volume of a country’s imports? A an appreciation of the country’s exchange rate B an increase in the country’s tariffs C a recession in the country D a rise in the country’s rate of income tax

1 marks

Answer: A

This question in 9708/11 May/June 2006

Q7 · A country’s terms of trade index currently stands at 120 (base year 2000) 9708/11 Oct/Nov 2006

21 A country’s terms of trade index currently stands at 120 (base year 2000). Since 2000, the average price of its imports has increased by 25 %. What has been the change in the average price the country has received for its exports over this period? A –10 % B +5 % C +45 % D +50 %

1 marks

Answer: D

This question in 9708/11 Oct/Nov 2006

Q8 · The diagram shows the UK trade balance with China and Japan in 2003 and 2004 9708/11 Oct/Nov 2006

22 The diagram shows the UK trade balance with China and Japan in 2003 and 2004. 2400 imports from China 2200 imports from Japan 2000 1800 1600 1400 £ billion 1200 1000 exports to Japan 800 600 exports to China 400 200 0 2003 2004 How did the trade balance of the UK change between the start of 2003 and the end of 2004? A There was a fall in the trade surplus with China. B There was a fall in the trade surplus with Japan. C There was a rise in the trade deficit with China. D There was a rise in the trade deficit with Japan.

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2006

Q9 · The table shows items from the balance of payments for countries A, B, C and D 9708/11 Oct/Nov 2006

27 The table shows items from the balance of payments for countries A, B, C and D. Official Financing is excluded from the Financial Account. Which country has the greatest disequilibrium on its balance of payments? Current Account Capital Account Financial Account $m $m $m A –41 13 28 B 44 12 25 C –32 –5 –37 D –15 –17 4

1 marks

Answer: B

This question in 9708/11 Oct/Nov 2006

Q10 · A country’s terms of trade increased from the base year value of 100 to 120 in the… 9708/11 May/June 2007

21 A country’s terms of trade increased from the base year value of 100 to 120 in the following year. Which behaviour of export prices and import prices would have caused this? export prices import prices A decreased 10 % increased 10 % B increased 10 % decreased 10 % C increased 20 % unchanged D unchanged decreased 20 %

1 marks

Answer: C

This question in 9708/11 May/June 2007

Q11 · The table shows the balance for four items in a country’s current account for two years 9708/11 May/June 2007

22 The table shows the balance for four items in a country’s current account for two years. visibles invisibles income transfers year 1 –72 84 12 –24 year 2 –87 46 –3 –44 What can be concluded about the changes between year 1 and year 2? A Income has moved from a net inflow to a net outflow. B The difference between the value of exported and imported services has increased. C The value of exported goods has fallen. D Transfers into the country have increased.

1 marks

Answer: A

This question in 9708/11 May/June 2007

Q12 · In which situation must a country’s balance of trade in goods and services improve? 9708/11 May/June 2007

27 In which situation must a country’s balance of trade in goods and services improve? A Export orders rise more than import orders. B Export prices rise more than import prices. C Export revenues rise more than import revenues. D Export volumes rise more than import volumes.

1 marks

Answer: C

This question in 9708/11 May/June 2007

Q13 · When must the terms of trade of a country change? 9708/11 Oct/Nov 2007

21 When must the terms of trade of a country change? A when the volume of exports falls and the volume of imports rises B when the total value of exports falls and the total value of imports rises C when the balance of trade moves from deficit to surplus D when the average price of exports rises and the average price of imports falls

1 marks

Answer: D

This question in 9708/11 Oct/Nov 2007

Q14 · The table shows all of the items on the current account of a country’s balance of payments 9708/11 Oct/Nov 2007

22 The table shows all of the items on the current account of a country’s balance of payments. $ million exports of goods 143 imports of goods 156 exports of services 75 imports of services 72 net transfers + 5 What is the value of the current account balance? A $13 m deficit B $10 m deficit C $5 m deficit D $3 m surplus

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2007

Q15 · A UK resident buys shares in a Spanish company 9708/11 Oct/Nov 2007

27 A UK resident buys shares in a Spanish company. What will be the immediate and subsequent effects on the UK’s balance of payments? immediate effect subsequent effect on financial account on current account A credit credit B credit debit C debit credit D debit debit

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2007

Q16 · There is a rise in the exchange rate of the US$ 9708/11 Oct/Nov 2007

29 There is a rise in the exchange rate of the US$. Which would cause the greatest increase in the US current account deficit? A a high level of domestic unemployment B a high price elasticity of demand for imports C a low price elasticity of demand for exports D a low rate of domestic inflation

1 marks

Answer: B

This question in 9708/11 Oct/Nov 2007

Q17 · Which item is recorded in the financial account of a country’s balance of payments? 9708/11 May/June 2008

22 Which item is recorded in the financial account of a country’s balance of payments? A a receipt of a gift of cash from abroad B a receipt of a subsidy from abroad C a receipt of interest from abroad D a receipt of funds for long-term investment from abroad

1 marks

Answer: D

This question in 9708/11 May/June 2008

Q18 · What is the likely effect on the volume of exports and imports if a country with a fixed… 9708/11 May/June 2008

26 What is the likely effect on the volume of exports and imports if a country with a fixed exchange rate experiences a higher rate of inflation than its trading partners? exports imports A increase decrease B decrease increase C increase increase D decrease decrease

1 marks

Answer: B

This question in 9708/11 May/June 2008

Q19 · In 2004, when international demand for oil was high, Bolivia encouraged investment by… 9708/11 May/June 2008

27 In 2004, when international demand for oil was high, Bolivia encouraged investment by foreign firms in order to exploit its oil and gas resources, mainly to improve its balance of payments position. What impact would this have on the balance of payments of Bolivia? A definitely favourable, as Bolivia could increase its exports of gas and oil B definitely unfavourable, as the foreign companies would transfer profits out of the country C uncertain, as there would be inflows and outflows of currency D zero, as Bolivia itself would use the gas and oil produced

1 marks

Answer: C

This question in 9708/11 May/June 2008

Q20 · The table shows observations of the exchange rate of an economy and its current account… 9708/11 May/June 2008

29 The table shows observations of the exchange rate of an economy and its current account balance over six years. exchange rate current account balance year (US dollars per unit (billions of US dollars) of domestic currency) 1 2.0 –3 2 1.5 –5 3 1.5 –4 4 1.5 –3 5 1.5 0 6 1.5 +3 Which concept does the data in the table illustrate? A exchange rate appreciation B purchasing power parity C the J-curve effect D trade-weighted exchange rates

1 marks

Answer: C

This question in 9708/11 May/June 2008

Q21 · A country has a current account deficit 9708/11 May/June 2008

30 A country has a current account deficit. Which component of its current account balance will be made less favourable as a direct result of a decision by the central bank to increase interest rates? A net investment income B net current transfers C the balance of trade in goods D the balance of trade in services

1 marks

Answer: A

This question in 9708/11 May/June 2008

Q22 · In which situation must the terms of trade be moving in a country’s favour? 9708/11 Oct/Nov 2008

22 In which situation must the terms of trade be moving in a country’s favour? A Its import prices are rising at a slower rate than its export prices. B There is a fall in both its import and its export prices. C There is an increase in its official reserves. D The volume of its exports is increasing more than the volume of its imports.

1 marks

Answer: A

This question in 9708/11 Oct/Nov 2008

Q23 · The diagram shows Australia’s exports to and imports from four trade partners in $billion… 9708/11 Oct/Nov 2008

26 The diagram shows Australia’s exports to and imports from four trade partners in $billion in 1994 and 2004. Australia’s exports and imports, $bn, 1994 and 2004 30 imports 25 1994 20 2004 15 exports 10 1994 2004 5 0 Japan United States China New Zealand With which country did Australia have a trade deficit in 1994 and a trade surplus in 2004? A Japan B United States C China D New Zealand

1 marks

Answer: B

This question in 9708/11 Oct/Nov 2008

Q24 · A country succeeds in attracting foreign direct investment 9708/11 Oct/Nov 2008

27 A country succeeds in attracting foreign direct investment. How is its effect recorded in its balance of payments in the short run and long run? short run long run A a credit item in the current a debit item in the account financial account B a debit item in the current a credit item in the account financial account C a credit item in the a debit item in the current financial account account D a debit item in the a credit item in the current financial account account

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2008

Q25 · Since 2000 a country’s export prices have increased on average by 50 % and its import… 9708/11 May/June 2009

22 Since 2000 a country’s export prices have increased on average by 50 % and its import prices by 25 %. What is the current figure for the country’s terms of trade (2000 = 100)? A 75 B 83 C 120 D 125

1 marks

Answer: C

This question in 9708/11 May/June 2009

Q26 · A developed country has a price-inelastic demand for oil, all of which it imports 9708/11 May/June 2009

26 A developed country has a price-inelastic demand for oil, all of which it imports. The oil-producing countries decide to provide more oil to the market. What is likely to happen as a result in the developed country to inflation, its balance of trade and the quantity of oil demanded? quantity of oil inflation balance of trade demanded A less likely improves rises B less likely worsens rises C more likely improves falls D more likely worsens falls

1 marks

Answer: A

This question in 9708/11 May/June 2009

Q27 · Why is it that a country’s balance of payments must always balance? 9708/11 May/June 2009

27 Why is it that a country’s balance of payments must always balance? A Exchange rate changes will correct any deficit or surplus. B One country’s deficit is matched by another’s surplus. C The current account is balanced by the capital and financial accounts. D The government must act to correct any disequilibrium.

1 marks

Answer: C

This question in 9708/11 May/June 2009

Q28 · The table shows the balances for four items in a country’s current account on the balance… 9708/11 Oct/Nov 2009

22 The table shows the balances for four items in a country’s current account on the balance of payments for two years. current visible invisible income transfers year 1 –72 84 12 –24 year 2 –87 46 –3 –4 What can be concluded about the changes between year 1 and year 2? A The current account balance has moved into deficit. B The difference between the value of exported and imported services has increased. C The earnings from ownership of foreign assets have increased. D The value of exported goods has fallen.

1 marks

Answer: A

This question in 9708/11 Oct/Nov 2009

Q29 · The table gives details of some parts of a country’s balance of payments 9708/11 Oct/Nov 2009

26 The table gives details of some parts of a country’s balance of payments. In which year did the country have its largest visible trade deficit? value of exports of value of imports of value of net income goods ($m) goods ($m) and transfers ($m) A 3914 3005 +110 B 3950 4073 +80 C 4774 4781 –65 D 5226 5102 –101

1 marks

Answer: B

This question in 9708/11 Oct/Nov 2009

Q30 · The table shows indicators of a country’s economic performance over a two-year period 9708/11 Oct/Nov 2009

27 The table shows indicators of a country’s economic performance over a two-year period. balance of trade in exchange volume of volume of year goods and services rate index exports index imports index ($) 1 100 100 100 zero 2 100 90 100 +500 million What is consistent with the above information? A There has been a fall in the price of exports. B There has been an improvement in the terms of trade. C There has been an increase in the level of real income per head. D There has been an increase in the price of imports.

1 marks

Answer: B

This question in 9708/11 Oct/Nov 2009

Q31 · The table shows the balances for four items in a country’s current account on the balance… 9708/12 Oct/Nov 2009

21 The table shows the balances for four items in a country’s current account on the balance of payments for two years. current visible invisible income transfers year 1 –72 84 12 –24 year 2 –87 46 –3 –4 What can be concluded about the changes between year 1 and year 2? A The current account balance has moved into deficit. B The difference between the value of exported and imported services has increased. C The earnings from ownership of foreign assets have increased. D The value of exported goods has fallen.

1 marks

Answer: A

This question in 9708/12 Oct/Nov 2009

Q32 · The table gives details of some parts of a country’s balance of payments 9708/12 Oct/Nov 2009

25 The table gives details of some parts of a country’s balance of payments. In which year did the country have its largest visible trade deficit? value of exports of value of imports of value of net income goods ($m) goods ($m) and transfers ($m) A 3914 3005 +110 B 3950 4073 +80 C 4774 4781 –65 D 5226 5102 –101

1 marks

Answer: B

This question in 9708/12 Oct/Nov 2009

Q33 · The table shows indicators of a country’s economic performance over a two-year period 9708/12 Oct/Nov 2009

26 The table shows indicators of a country’s economic performance over a two-year period. balance of trade in exchange volume of volume of year goods and services rate index exports index imports index ($) 1 100 100 100 zero 2 100 90 100 +500 million What is consistent with the above information? A There has been a fall in the price of exports. B There has been an improvement in the terms of trade. C There has been an increase in the level of real income per head. D There has been an increase in the price of imports.

1 marks

Answer: B

This question in 9708/12 Oct/Nov 2009

Q34 · The table shows the balance in $ million for four items in a country’s current account… 9708/11 May/June 2010

22 The table shows the balance in $ million for four items in a country’s current account for two years. visibles invisibles income transfers Year 1 –72 84 –3 –24 Year 2 –87 96 12 –44 What can be concluded about the changes between Year 1 and Year 2? A Income has moved from a net inflow to a net outflow. B The difference between the value of exported and imported services has increased. C The value of exported goods has fallen. D Transfers into the country have increased.

1 marks

Answer: B

This question in 9708/11 May/June 2010

Q35 · What would identify a country with a balance of payments disequilibrium? 9708/11 May/June 2010

28 What would identify a country with a balance of payments disequilibrium? A alternate annual deficits and surpluses in the current account B a continually growing balancing item C a large short-term outflow of foreign direct investment D a persistent rise in foreign currency reserves

1 marks

Answer: D

This question in 9708/11 May/June 2010

Q36 · The table shows the balance in $ million for four items in a country’s current account… 9708/12 May/June 2010

21 The table shows the balance in $ million for four items in a country’s current account for two years. visibles invisibles income transfers Year 1 –72 84 –3 –24 Year 2 –87 96 12 –44 What can be concluded about the changes between Year 1 and Year 2? A Income has moved from a net inflow to a net outflow. B The difference between the value of exported and imported services has increased. C The value of exported goods has fallen. D Transfers into the country have increased.

1 marks

Answer: B

This question in 9708/12 May/June 2010

Q37 · When is a deficit on the current account of the balance of payments likely to worsen? 9708/12 May/June 2010

26 When is a deficit on the current account of the balance of payments likely to worsen? A when the government adopts a deflationary macroeconomic policy B when the government devalues the currency C when the prices of imported products that are demand-inelastic increase significantly D when tariffs are placed on imported products that are demand-elastic

1 marks

Answer: C

This question in 9708/12 May/June 2010

Q38 · What would identify a country with a balance of payments disequilibrium? 9708/12 May/June 2010

27 What would identify a country with a balance of payments disequilibrium? A alternate annual deficits and surpluses in the current account B a continually growing balancing item C a large short-term outflow of foreign direct investment D a persistent rise in foreign currency reserves

1 marks

Answer: D

This question in 9708/12 May/June 2010

Q39 · The table shows the balance in $ million for four items in a country’s current account… 9708/13 May/June 2010

20 The table shows the balance in $ million for four items in a country’s current account for two years. visibles invisibles income transfers Year 1 –72 84 –3 –24 Year 2 –87 96 12 –44 What can be concluded about the changes between Year 1 and Year 2? A Income has moved from a net inflow to a net outflow. B The difference between the value of exported and imported services has increased. C The value of exported goods has fallen. D Transfers into the country have increased.

1 marks

Answer: B

This question in 9708/13 May/June 2010

Q40 · What would identify a country with a balance of payments disequilibrium? 9708/13 May/June 2010

26 What would identify a country with a balance of payments disequilibrium? A alternate annual deficits and surpluses in the current account B a continually growing balancing item C a large short-term outflow of foreign direct investment D a persistent rise in foreign currency reserves

1 marks

Answer: D

This question in 9708/13 May/June 2010

Q41 · A government has low reserves of foreign currency 9708/11 Oct/Nov 2010

26 A government has low reserves of foreign currency. When would it be likely to consider a deficit on current account to be a serious problem? A when the country is experiencing a period of high, sustained growth B when the deficit alternates regularly with a surplus C when the deficit exceeds the sum of errors and omissions in the balance of payments account D when the level of international confidence in the country is low

1 marks

Answer: D

This question in 9708/11 Oct/Nov 2010

Q42 · A government has low reserves of foreign currency 9708/12 Oct/Nov 2010

26 A government has low reserves of foreign currency. When would it be likely to consider a deficit on current account to be a serious problem? A when the country is experiencing a period of high, sustained growth B when the deficit alternates regularly with a surplus C when the deficit exceeds the sum of errors and omissions in the balance of payments account D when the level of international confidence in the country is low

1 marks

Answer: D

This question in 9708/12 Oct/Nov 2010

Q43 · In a country the Marshall-Lerner condition for an improvement in the trade balance is… 9708/12 Oct/Nov 2010

28 In a country the Marshall-Lerner condition for an improvement in the trade balance is satisfied in the long run, but quantities of imports and exports are slow to respond to price changes. The government devalues its currency to reduce its trade deficit. Which curve indicates the probable behaviour of the trade balance? A B + trade C 0 balance – D time

1 marks

Answer: B

This question in 9708/12 Oct/Nov 2010

Q44 · A government has low reserves of foreign currency 9708/13 Oct/Nov 2010

25 A government has low reserves of foreign currency. When would it be likely to consider a deficit on current account to be a serious problem? A when the country is experiencing a period of high, sustained growth B when the deficit alternates regularly with a surplus C when the deficit exceeds the sum of errors and omissions in the balance of payments account D when the level of international confidence in the country is low

1 marks

Answer: D

This question in 9708/13 Oct/Nov 2010

Q45 · A country’s terms of trade currently stands at 150 (base year 2000 = 100) 9708/11 May/June 2011

21 A country’s terms of trade currently stands at 150 (base year 2000 = 100). Since 2000 the average price the country has received for its exports has increased by 20 %. What has been the change in the average price it has paid for its imports? A –25 % B –20 % C +20 % D +25 %

1 marks

Answer: B

This question in 9708/11 May/June 2011

Q46 · A government wishes to present its final balance of payments account 9708/11 May/June 2011

22 A government wishes to present its final balance of payments account. It has calculated the current account balance, the capital account balance and the financial account balance. What additional information is required to complete the task? A change in foreign currency reserves B foreign aid C net errors and omissions D speculative currency flows

1 marks

Answer: C

This question in 9708/11 May/June 2011

Q47 · A Japanese company builds a factory in the UK to supply both the UK market and the market… 9708/11 May/June 2011

26 A Japanese company builds a factory in the UK to supply both the UK market and the market in the rest of Europe. What is likely to be the long-run impact on the UK’s balance of trade in goods and on its current balance? balance of trade current in goods balance A improve improve B improve uncertain C worsen improve D worsen uncertain

1 marks

Answer: B

This question in 9708/11 May/June 2011

Q48 · A country experiences changes in the value of its exports and imports of goods and… 9708/11 May/June 2011

27 A country experiences changes in the value of its exports and imports of goods and services and its inflow of incomes and transfers. These are shown in the table. Which set of changes is most likely to cause a depreciation in its floating exchange rate? net inflow of export value import value incomes and transfers A fall fall fall B fall rise fall C rise fall rise D rise rise rise

1 marks

Answer: B

This question in 9708/11 May/June 2011

Q49 · The table shows observations of the exchange rate of an economy and its current account… 9708/11 May/June 2011

29 The table shows observations of the exchange rate of an economy and its current account balance over six years. exchange rate current account balance year (US dollars per unit (billions of US dollars) of domestic currency) 1 2.0 –3 2 1.5 –5 3 1.5 –4 4 1.5 –3 5 1.5 0 6 1.5 +3 Which concept does the data in the table illustrate? A exchange rate appreciation B purchasing power parity C the J-curve effect D trade-weighted exchange rates

1 marks

Answer: C

This question in 9708/11 May/June 2011

Q50 · A country’s terms of trade currently stands at 150 (base year 2000 = 100) 9708/12 May/June 2011

20 A country’s terms of trade currently stands at 150 (base year 2000 = 100). Since 2000 the average price the country has received for its exports has increased by 20 %. What has been the change in the average price it has paid for its imports? A –25 % B –20 % C +20 % D +25 %

1 marks

Answer: B

This question in 9708/12 May/June 2011

Q51 · A government wishes to present its final balance of payments account 9708/12 May/June 2011

21 A government wishes to present its final balance of payments account. It has calculated the current account balance, the capital account balance and the financial account balance. What additional information is required to complete the task? A change in foreign currency reserves B foreign aid C net errors and omissions D speculative currency flows

1 marks

Answer: C

This question in 9708/12 May/June 2011

Q52 · A Japanese company builds a factory in the UK to supply both the UK market and the market… 9708/12 May/June 2011

25 A Japanese company builds a factory in the UK to supply both the UK market and the market in the rest of Europe. What is likely to be the long-run impact on the UK’s balance of trade in goods and on its current balance? balance of trade current in goods balance A improve improve B improve uncertain C worsen improve D worsen uncertain

1 marks

Answer: B

This question in 9708/12 May/June 2011

Q53 · A country experiences changes in the value of its exports and imports of goods and… 9708/12 May/June 2011

26 A country experiences changes in the value of its exports and imports of goods and services and its inflow of incomes and transfers. These are shown in the table. Which set of changes is most likely to cause a depreciation in its floating exchange rate? net inflow of export value import value incomes and transfers A fall fall fall B fall rise fall C rise fall rise D rise rise rise

1 marks

Answer: B

This question in 9708/12 May/June 2011

Q54 · A country’s terms of trade currently stands at 150 (base year 2000 = 100) 9708/13 May/June 2011

19 A country’s terms of trade currently stands at 150 (base year 2000 = 100). Since 2000 the average price the country has received for its exports has increased by 20 %. What has been the change in the average price it has paid for its imports? A –25 % B –20 % C +20 % D +25 %

1 marks

Answer: B

This question in 9708/13 May/June 2011

Q55 · A government wishes to present its final balance of payments account 9708/13 May/June 2011

20 A government wishes to present its final balance of payments account. It has calculated the current account balance, the capital account balance and the financial account balance. What additional information is required to complete the task? A change in foreign currency reserves B foreign aid C net errors and omissions D speculative currency flows

1 marks

Answer: C

This question in 9708/13 May/June 2011

Q56 · A Japanese company builds a factory in the UK to supply both the UK market and the market… 9708/13 May/June 2011

24 A Japanese company builds a factory in the UK to supply both the UK market and the market in the rest of Europe. What is likely to be the long-run impact on the UK’s balance of trade in goods and on its current balance? balance of trade current in goods balance A improve improve B improve uncertain C worsen improve D worsen uncertain

1 marks

Answer: B

This question in 9708/13 May/June 2011

Q57 · A country experiences changes in the value of its exports and imports of goods and… 9708/13 May/June 2011

25 A country experiences changes in the value of its exports and imports of goods and services and its inflow of incomes and transfers. These are shown in the table. Which set of changes is most likely to cause a depreciation in its floating exchange rate? net inflow of export value import value incomes and transfers A fall fall fall B fall rise fall C rise fall rise D rise rise rise

1 marks

Answer: B

This question in 9708/13 May/June 2011

Q58 · Which combination of export and import prices will cause the greatest change in a… 9708/11 Oct/Nov 2011

21 Which combination of export and import prices will cause the greatest change in a country’s terms of trade? export prices import prices A decrease by 1 % increase by 1 % B decrease by 2 % no change C increase by 1 % decrease by 1 % D no change increase by 2 %

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2011

Q59 · An Indian multinational company receives profits from its factories based in the UK 9708/11 Oct/Nov 2011

22 An Indian multinational company receives profits from its factories based in the UK. It then buys a US-owned firm based in the UK. How will these transactions appear in India’s balance of payments? the remittance of profit the purchase of the US-owned firm A a credit item in the current account a debit item in the financial account B a credit item in the financial account a debit item in the current account C a debit item in the current account a credit item in the financial account D a debit item in the financial account a credit item in the current account

1 marks

Answer: A

This question in 9708/11 Oct/Nov 2011

Q60 · Which combination is likely to result from demand-pull inflation? 9708/11 Oct/Nov 2011

25 Which combination is likely to result from demand-pull inflation? balance of trade profits A improving falling B improving rising C worsening falling D worsening rising

1 marks

Answer: D

This question in 9708/11 Oct/Nov 2011

Q61 · In 2008-9 American households reduced their consumption of domestic and imported goods… 9708/11 Oct/Nov 2011

26 In 2008-9 American households reduced their consumption of domestic and imported goods and used part of the money to pay back some of their debts. Which outcome could be consistent with this change? A a decline in the US trade deficit B a decrease in savings C a decrease in the US terms of trade D a decrease in unemployment

1 marks

Answer: A

This question in 9708/11 Oct/Nov 2011

Q62 · In 2004, when international demand for oil was high, Bolivia encouraged investment by… 9708/11 Oct/Nov 2011

29 In 2004, when international demand for oil was high, Bolivia encouraged investment by foreign firms in order to exploit its oil and gas resources. What impact would this have on the balance of payments of Bolivia? A definitely favourable, as Bolivia could increase its exports of gas and oil B definitely unfavourable, as the foreign companies would transfer profits out of the country C uncertain, as there would be inflows and outflows of currency D zero, as Bolivia itself would use the gas and oil produced

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2011

Q63 · The table shows all of the items on the current account of a country’s balance of payments 9708/12 Oct/Nov 2011

22 The table shows all of the items on the current account of a country’s balance of payments. $ million exports of goods 143 imports of goods 156 exports of services 75 imports of services 72 net transfers + 5 What is the value of the current account balance? A $13 m deficit B $10 m deficit C $5 m deficit D $3 m surplus

1 marks

Answer: C

This question in 9708/12 Oct/Nov 2011

Q64 · The table shows items from the balance of payments for countries A, B, C and D 9708/12 Oct/Nov 2011

26 The table shows items from the balance of payments for countries A, B, C and D. Official Financing including changes in reserves is excluded from the Financial Account. Which country has the greatest disequilibrium on its balance of payments? Current Account Capital Account Financial Account $m $m $m A –41 13 28 B 44 12 25 C –32 –5 –37 D –15 –17 4

1 marks

Answer: B

This question in 9708/12 Oct/Nov 2011

Q65 · What must be the necessary result of a surplus in the current account of a country’s… 9708/12 Oct/Nov 2011

27 What must be the necessary result of a surplus in the current account of a country’s balance of payments? A a depreciation of the currency B an improvement in the terms of trade C an increase in foreign exchange reserves D an increase in net holdings of foreign assets

1 marks

Answer: D

This question in 9708/12 Oct/Nov 2011

Q66 · Which combination of export and import prices will cause the greatest change in a… 9708/13 Oct/Nov 2011

19 Which combination of export and import prices will cause the greatest change in a country’s terms of trade? export prices import prices A decrease by 1 % increase by 1 % B decrease by 2 % no change C increase by 1 % decrease by 1 % D no change increase by 2 %

1 marks

Answer: C

This question in 9708/13 Oct/Nov 2011

Q67 · An Indian multinational company receives profits from its factories based in the UK 9708/13 Oct/Nov 2011

20 An Indian multinational company receives profits from its factories based in the UK. It then buys a US-owned firm based in the UK. How will these transactions appear in India’s balance of payments? the remittance of profit the purchase of the US-owned firm A a credit item in the current account a debit item in the financial account B a credit item in the financial account a debit item in the current account C a debit item in the current account a credit item in the financial account D a debit item in the financial account a credit item in the current account

1 marks

Answer: A

This question in 9708/13 Oct/Nov 2011

Q68 · In 2008-9 American households reduced their consumption of domestic and imported goods… 9708/13 Oct/Nov 2011

24 In 2008-9 American households reduced their consumption of domestic and imported goods and used part of the money to pay back some of their debts. Which outcome could be consistent with this change? A a decline in the US trade deficit B a decrease in savings C a decrease in the US terms of trade D a decrease in unemployment

1 marks

Answer: A

This question in 9708/13 Oct/Nov 2011

Q69 · In 2004, when international demand for oil was high, Bolivia encouraged investment by… 9708/13 Oct/Nov 2011

27 In 2004, when international demand for oil was high, Bolivia encouraged investment by foreign firms in order to exploit its oil and gas resources. What impact would this have on the balance of payments of Bolivia? A definitely favourable, as Bolivia could increase its exports of gas and oil B definitely unfavourable, as the foreign companies would transfer profits out of the country C uncertain, as there would be inflows and outflows of currency D zero, as Bolivia itself would use the gas and oil produced

1 marks

Answer: C

This question in 9708/13 Oct/Nov 2011

Q70 · A firm borrows money from a bank based abroad in order to pay a lower rate of interest… 9708/11 May/June 2012

22 A firm borrows money from a bank based abroad in order to pay a lower rate of interest than that available from banks in its own country. Which two parts of the balance of payments accounts will be affected by this transaction? A capital account and currency reserves B capital account and trade in services C financial account and net income flows D financial account and net current transfers

1 marks

Answer: C

This question in 9708/11 May/June 2012

Q71 · A firm borrows money from a bank based abroad in order to pay a lower rate of interest… 9708/12 May/June 2012

22 A firm borrows money from a bank based abroad in order to pay a lower rate of interest than that available from banks in its own country. Which two parts of the balance of payments accounts will be affected by this transaction? A capital account and currency reserves B capital account and trade in services C financial account and net income flows D financial account and net current transfers

1 marks

Answer: C

This question in 9708/12 May/June 2012

Q72 · A country has a fixed exchange rate 9708/12 May/June 2012

26 A country has a fixed exchange rate. What is likely to result in an improvement in its balance of payments? A a decrease in interest rates in foreign countries B a decrease in the country’s interest rates C a decrease in the income of foreign countries D an increase in the country’s national income

1 marks

Answer: A

This question in 9708/12 May/June 2012

Q73 · The diagram shows the UK trade balance with China and Japan in 2003 and 2004 9708/13 May/June 2012

22 The diagram shows the UK trade balance with China and Japan in 2003 and 2004. 2400 imports from China 2200 imports from Japan 2000 1800 1600 1400 £ billion 1200 1000 exports to Japan 800 600 exports to China 400 200 0 2003 2004 How did the trade balance of the UK change between the start of 2003 and the end of 2004? A There was a fall in the trade surplus with China. B There was a fall in the trade surplus with Japan. C There was a rise in the trade deficit with China. D There was a rise in the trade deficit with Japan.

1 marks

Answer: C

This question in 9708/13 May/June 2012

Q74 · The UK experienced a growing deficit in its trade in goods during 2003 to 2007 but it… 9708/13 May/June 2012

27 The UK experienced a growing deficit in its trade in goods during 2003 to 2007 but it also had a stable exchange rate. What could have explained why the trade deficit failed to cause the exchange rate to change? A Investment income earned by foreigners in the UK was greater than that earned by UK residents on assets held abroad. B Speculators anticipated that the trade deficit would result in a fall in the value of the pound. C The UK’s trade in goods deficit was larger than its trade in services surplus. D The UK attracted a net inflow of foreign direct and portfolio investment.

1 marks

Answer: D

This question in 9708/13 May/June 2012

Q75 · Russia is a significant exporter of wheat 9708/11 Oct/Nov 2012

21 Russia is a significant exporter of wheat. In 2010 there was a poor harvest and the Russian government stopped all exports of wheat to ensure enough supplies for domestic use. Which statement about Russia’s policy is correct? A It is an embargo and will worsen Russia’s balance of trade. B It is a market approach to resource allocation to prevent price rises in Russia. C It is a quota and will improve the importing country’s balance of payments. D It is a tariff and will increase the price of wheat.

1 marks

Answer: A

This question in 9708/11 Oct/Nov 2012

Q76 · Two industries in a country are fishing and tourism 9708/11 Oct/Nov 2012

26 Two industries in a country are fishing and tourism. The international exchange rate of the country’s currency fell in 2010. If there were no other changes, how was the country affected? A Local people bought more imported goods because they were cheaper. B The price of fish sold in foreign markets became cheaper. C The volume of exports decreased. D Tourists to the country were discouraged by higher prices.

1 marks

Answer: B

This question in 9708/11 Oct/Nov 2012

Q77 · The diagram shows Australia’s exports to and imports from four trade partners in $billion… 9708/11 Oct/Nov 2012

27 The diagram shows Australia’s exports to and imports from four trade partners in $billion in 1994 and 2004. Australia’s exports and imports, $bn, 1994 and 2004 30 imports 25 1994 20 2004 15 exports 10 1994 2004 5 0 Japan United States China New Zealand With which country did Australia have a trade deficit in 1994 and a trade surplus in 2004? A Japan B United States C China D New Zealand

1 marks

Answer: B

This question in 9708/11 Oct/Nov 2012

Q78 · The table shows in millions of US$ the balance for four items in a country’s current… 9708/12 Oct/Nov 2012

22 The table shows in millions of US$ the balance for four items in a country’s current account for two years. goods services income transfers year 1 –72 84 12 –24 year 2 –87 46 –3 –44 What can be concluded about the changes between year 1 and year 2? A Income has moved from a net inflow to a net outflow. B The value of exported goods has fallen. C The value of imported services has increased. D Transfers into the country have increased.

1 marks

Answer: A

This question in 9708/12 Oct/Nov 2012

Q79 · The table shows the Canadian current account of the balance of payments in 2005 and 2006 9708/12 Oct/Nov 2012

27 The table shows the Canadian current account of the balance of payments in 2005 and 2006. 2005 2006 ($m) ($m) goods 62 372 –4 568 services 12 055 –22 663 investment income –22 917 –14 145 transfers –1 498 –2 148 total 25 902 –43 523 The change in which item contributed the least and the change in which item contributed the most to the move from surplus to deficit in the Canadian current account balance between 2005 and 2006? item contributing item contributing the least the most A investment income goods B investment income services C transfers goods D transfers services

1 marks

Answer: A

This question in 9708/12 Oct/Nov 2012

Q80 · What is most likely to result from a rising deficit in a country’s balance of payments… 9708/12 Oct/Nov 2012

28 What is most likely to result from a rising deficit in a country’s balance of payments from increased imports of consumer goods? A a rise in aggregate monetary demand in the country B a rise in the country’s aggregate supply C a rise in the country’s unemployment D a rise in the international value of the country’s currency

1 marks

Answer: C

This question in 9708/12 Oct/Nov 2012

Q81 · Between 2005 and 2010, a country’s import prices rose by 25 % and its terms of trade rose… 9708/13 Oct/Nov 2012

22 Between 2005 and 2010, a country’s import prices rose by 25 % and its terms of trade rose to 120 (2005 = 100). Which change has there been in the country’s export prices? A –5 % B 12.5 % C 45 % D 50 %

1 marks

Answer: D

This question in 9708/13 Oct/Nov 2012

Q82 · The table shows some of the elements of aggregate demand in selected countries in US$ in… 9708/13 Oct/Nov 2012

24 The table shows some of the elements of aggregate demand in selected countries in US$ in 2009. consumer expenditure aggregate demand + investment exports country (US$ bn) + government spending (US$ bn) (US$ bn) Argentina 262 251 64 Brazil 1313 1291 180 Kenya 24 27 6 South Africa 283 292 89 What can be concluded from this information? A Argentina had a trade surplus of US$53 bn. B Brazil had a trade surplus of US$158 bn. C Kenya had a trade deficit of US$3 bn. D South Africa had a trade deficit of US$98 bn.

1 marks

Answer: C

This question in 9708/13 Oct/Nov 2012

Q83 · The table gives information about the trade between Singapore and New Zealand during… 9708/13 Oct/Nov 2012

28 The table gives information about the trade between Singapore and New Zealand during 2001, the first year after they signed a free trade agreement. The values are given both in Singapore dollars (S$) and New Zealand dollars (NZ$). percentage change S$ m NZ$ m from 2000 Singapore exports to New Zealand 508 618 +20 % Singapore imports from New Zealand 331 403 –17 % What can be concluded from the table? A New Zealand gained more than Singapore from the trade agreement. B New Zealand’s trade position with Singapore improved in 2001. C Singapore had a trade surplus with New Zealand in 2001. D The exchange rate in 2001 was approximately NZ$ 1 = S$ 1.2.

1 marks

Answer: C

This question in 9708/13 Oct/Nov 2012

Q84 · The table shows the balances for four items in a country’s current account on the balance… 9708/11 May/June 2013

22 The table shows the balances for four items in a country’s current account on the balance of payments for two years. current goods services income transfers US$ m US$ m US$ m US$ m year 1 –72 84 12 –24 year 2 –87 46 –3 –4 What can be concluded about the changes between year 1 and year 2? A The current account balance has moved into deficit. B The difference between the value of exported and imported services has increased. C The earnings from ownership of foreign assets have increased. D The value of exported goods has fallen.

1 marks

Answer: A

This question in 9708/11 May/June 2013

Q85 · If a country succeeds in attracting foreign direct investment in a single year, what is… 9708/11 May/June 2013

26 If a country succeeds in attracting foreign direct investment in a single year, what is the result on its balance of payments in the short run and long run? short run long run A a credit in the current account a debit in the financial account B a debit in the current account a credit in the financial account C a credit in the financial account uncertain in the current account D uncertain in the financial account a credit in the current account

1 marks

Answer: C

This question in 9708/11 May/June 2013

Q86 · Since 2000 a country’s export prices have increased on average by 50% and its import… 9708/12 May/June 2013

22 Since 2000 a country’s export prices have increased on average by 50% and its import prices by 25%. What is the current figure for the country’s terms of trade (2000 = 100)? A 75 B 83 C 120 D 125

1 marks

Answer: C

This question in 9708/12 May/June 2013

Q87 · When is a balance of trade deficit likely to be considered a particularly difficult… 9708/12 May/June 2013

27 When is a balance of trade deficit likely to be considered a particularly difficult problem for a country? A when the imported goods are identical to domestic products B when the imported goods are items of capital equipment C when the imported goods are the raw material for exports D when the imported goods are to cover a temporary shortage

1 marks

Answer: A

This question in 9708/12 May/June 2013

Q88 · In spring 2011 the US$ exchanged for 81.6 yen 9708/12 May/June 2013

29 In spring 2011 the US$ exchanged for 81.6 yen. In spring 2012 the US$ exchanged for 76.1 yen. What would be expected to rise for the United States as a result of this change? A the level of unemployment B the price of exports sold in Japan C the rate of imported inflation D the volume of imports

1 marks

Answer: C

This question in 9708/12 May/June 2013

Q89 · A country’s terms of trade increased from the base year value of 100 to 120 in the… 9708/13 May/June 2013

21 A country’s terms of trade increased from the base year value of 100 to 120 in the following year. What changes in export prices and import prices would have caused this? export prices import prices A decreased 10% increased 10% B increased 10% decreased 10% C increased 20% unchanged D unchanged decreased 20%

1 marks

Answer: C

This question in 9708/13 May/June 2013

Q90 · The balance of payments accounts are arranged in the following way 9708/13 May/June 2013

22 The balance of payments accounts are arranged in the following way. Which total is the current account balance? balance of trade in goods + balance of trade in services =total A + net income = total B + net transfers = total C + capital balance = total D financial balance errors and omissions

1 marks

Answer: C

This question in 9708/13 May/June 2013

Q91 · Which item that relates to a Japanese-owned car assembly plant in the US will not be… 9708/11 Oct/Nov 2013

22 Which item that relates to a Japanese-owned car assembly plant in the US will not be recorded in the current account of the balance of payments of the US? A components imported from Japan B interest charges on a loan from a US based international bank C investment by the parent company in the plant’s assembly line D profits remitted to the Japanese parent company

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2013

Q92 · Why may a government seek to reduce a current account surplus on the balance of payments? 9708/11 Oct/Nov 2013

27 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

1 marks

Answer: A

This question in 9708/11 Oct/Nov 2013

Q93 · A UK resident buys shares in a Spanish company 9708/12 Oct/Nov 2013

26 A UK resident buys shares in a Spanish company. What will be the immediate and subsequent effects on the UK’s balance of payments? immediate effect subsequent effect on financial account on current account A credit credit B credit debit C debit credit D debit debit

1 marks

Answer: C

This question in 9708/12 Oct/Nov 2013

Q94 · The table gives details of some parts of a country’s balance of payments 9708/12 Oct/Nov 2013

27 The table gives details of some parts of a country’s balance of payments. In which year did the country have its largest trade deficit? value of exports of value of imports of value of net income goods ($m) goods ($m) and transfers ($m) A 3914 3005 +110 B 3950 4073 +80 C 4774 4781 –65 D 5226 5102 –101

1 marks

Answer: B

This question in 9708/12 Oct/Nov 2013

Q95 · What is not an item in a country’s current account of its balance of payments? 9708/13 Oct/Nov 2013

22 What is not an item in a country’s current account of its balance of payments? A exports of primary commodities B money received from banking services C overseas investment D profits sent back by companies overseas

1 marks

Answer: C

This question in 9708/13 Oct/Nov 2013

Q96 · What combination is most likely to cause a surplus in a country’s trade in goods and… 9708/13 Oct/Nov 2013

26 What combination is most likely to cause a surplus in a country’s trade in goods and services? international value rate of inflation of currency A high strong B high weak C low strong D low weak

1 marks

Answer: D

This question in 9708/13 Oct/Nov 2013

Q97 · The diagram shows demand and supply curves of the £ sterling against the US dollar 9708/13 Oct/Nov 2013

28 The diagram shows demand and supply curves of the £ sterling against the US dollar. S price of £ sterling in US dollars D2 S D1 O quantity of £s What is likely to cause a shift in the demand curve from D1 to D2? A an adverse balance of payments in the UK B an increased demand for UK goods in the USA C an increase in UK tourists visiting the USA D an increase in US interest rates

1 marks

Answer: B

This question in 9708/13 Oct/Nov 2013

Q98 · A US company receives a US$20 million dividend from shares that it owns in a Brazilian… 9708/11 May/June 2014

22 A US company receives a US$20 million dividend from shares that it owns in a Brazilian company. How would this dividend be shown in the balance of payments of the United States? A a credit in the capital account B a credit in the current account C a debit in the capital account D a debit in the current account

1 marks

Answer: B

This question in 9708/11 May/June 2014

Q99 · What would lead a country to move from a surplus to a deficit on the current account of… 9708/12 May/June 2014

27 What would lead a country to move from a surplus to a deficit on the current account of the balance of payments? A a depreciating exchange rate combined with a high rate of inflation and falling productivity B a depreciating exchange rate combined with a low rate of inflation and rising productivity C an appreciating exchange rate combined with a high rate of inflation and falling productivity D an appreciating exchange rate combined with a low rate of inflation and rising productivity

1 marks

Answer: C

This question in 9708/12 May/June 2014

Q100 · The table shows details on the Gross Domestic Product (GDP) and the balance of payments… 9708/13 May/June 2014

20 The table shows details on the Gross Domestic Product (GDP) and the balance of payments of four countries. Which country had the largest net errors and omissions figure in terms of US$? current account total of capital GDP balance as a % and financial (US$) of GDP accounts (US$) A 50bn –8.0 4bn B 50bn –2.0 3bn C 100bn –3.0 3bn D 100bn +4.0 –4bn

1 marks

Answer: B

This question in 9708/13 May/June 2014

Q101 · Why is a deficit on the current account of the balance of payments in economies with… 9708/13 May/June 2014

26 Why is a deficit on the current account of the balance of payments in economies with freely floating exchange rates often thought to be an economic problem? A It implies a net outflow of capital from the economy. B It involves borrowing from abroad. C It leads to increases in unemployment. D It results in a loss of foreign exchange reserves.

1 marks

Answer: B

This question in 9708/13 May/June 2014

Q102 · In which situation must a country’s balance of trade in goods and services improve? 9708/13 May/June 2014

27 In which situation must a country’s balance of trade in goods and services improve? A Export costs rise more than import costs. B Export prices rise more than import prices. C Export revenues rise more than import revenues. D Export volumes rise more than import volumes.

1 marks

Answer: C

This question in 9708/13 May/June 2014

Q103 · What must be the result for a country of a rise in its export prices relative to its… 9708/11 Oct/Nov 2014

21 What must be the result for a country of a rise in its export prices relative to its import prices? A a deficit in its trade in goods B an improvement in its terms of trade C an increase in its inflation rate D a rise in its exchange rate

1 marks

This question in 9708/11 Oct/Nov 2014

Q104 · A country imports components which it uses in the production of electrical goods for the… 9708/11 Oct/Nov 2014

22 A country imports components which it uses in the production of electrical goods for the domestic market. The country is experiencing a rise in incomes. What is likely to happen to the price of electrical goods and the country’s balance of trade? price of balance electrical goods of trade A fall improve B fall worsen C rise improve D rise worsen

1 marks

This question in 9708/11 Oct/Nov 2014

Q105 · Which international transaction is correctly matched to the part of the balance of… 9708/12 Oct/Nov 2014

22 Which international transaction is correctly matched to the part of the balance of payments account in which it is recorded? transaction part of account A the outflow of funds from national balancing item reserves to foreign residents B the provision of banking financial section services to foreign companies C the purchase of shares capital section in foreign banks D the receipt of interest on income section loans to foreign companies

1 marks

Answer: D

This question in 9708/12 Oct/Nov 2014

Q106 · What might explain an increase in the volume of a country’s imports? 9708/12 Oct/Nov 2014

26 What might explain an increase in the volume of a country’s imports? A an appreciation of the country’s exchange rate B an increase in the country’s tariffs C a recession in the country D a rise in the country’s rate of income tax

1 marks

Answer: A

This question in 9708/12 Oct/Nov 2014

Q107 · What is the most likely consequence of an increase in a country’s balance of payments… 9708/12 Oct/Nov 2014

27 What is the most likely consequence of an increase in a country’s balance of payments deficit? A an increase in the foreign value of the currency of the country B an increase in the level of income within the country C a reduction in the quantity of money within the country D a reduction in unemployment within the country

1 marks

Answer: C

This question in 9708/12 Oct/Nov 2014

Q108 · A Japanese car manufacturer sets up a factory to produce car parts in Malaysia 9708/13 Oct/Nov 2014

22 A Japanese car manufacturer sets up a factory to produce car parts in Malaysia. How is this likely to affect Malaysia’s trade balance and its income balance in the current account of the balance of payments? trade balance income balance A improve improve B improve worsen C worsen improve D worsen worsen

1 marks

Answer: B

This question in 9708/13 Oct/Nov 2014

Q109 · Why might an increase in a current account surplus cause inflation? 9708/13 Oct/Nov 2014

27 Why might an increase in a current account surplus cause inflation? A It will decrease aggregate supply. B It will decrease the money supply. C It will increase aggregate demand. D It will increase the exchange rate.

1 marks

Answer: C

This question in 9708/13 Oct/Nov 2014

Q110 · In the base year, which combination of export and import price changes will have the… 9708/11 May/June 2015

21 In the base year, which combination of export and import price changes will have the greatest effect on the country’s terms of trade? export prices import prices A decrease by 1% increase by 1% B decrease by 2% no change C increase by 1% decrease by 1% D no change increase by 2%

1 marks

Answer: C

This question in 9708/11 May/June 2015

Q111 · The table shows selected balances from a country’s balance of payments accounts in 2012 9708/11 May/June 2015

22 The table shows selected balances from a country’s balance of payments accounts in 2012. $ billion trade in goods –20 trade in services +5 net income +8 net foreign transfers –4 net foreign loans –3 What was the country’s current account balance in 2012? A –$15 billion B –$14 billion C –$11 billion D –$7 billion

1 marks

Answer: C

This question in 9708/11 May/June 2015

Q112 · Between 2011 and 2013, high street retailers reported that expenditure on home-produced… 9708/11 May/June 2015

27 Between 2011 and 2013, high street retailers reported that expenditure on home-produced and imported goods was reduced. Consumers did not take out loans as the economy was in a recession. What is the likely result of this? A a decline in the deficit in the trade account B a decline in the level of savings C a decline in the terms of trade D a decline in unemployment

1 marks

Answer: A

This question in 9708/11 May/June 2015

Q113 · The table shows the balance in $million for four items in a country’s current account for… 9708/12 May/June 2015

22 The table shows the balance in $million for four items in a country’s current account for two years. goods services income transfers Year 1 –72 84 –3 –24 Year 2 –87 96 12 –44 What can be concluded about the changes between Year 1 and Year 2? A Income has moved from a net inflow to a net outflow. B The difference between the value of exported and imported services has increased. C The value of exported goods has fallen. D Transfers into the country have increased.

1 marks

Answer: B

This question in 9708/12 May/June 2015

Q114 · When is a deficit on the current account of the balance of payments likely to worsen? 9708/12 May/June 2015

26 When is a deficit on the current account of the balance of payments likely to worsen? A when a government adopts a deflationary macroeconomic policy B when a government devalues the currency C when prices of essential imported raw materials increase significantly D when tariffs are placed on imported products with a wide range of domestic substitutes

1 marks

Answer: C

This question in 9708/12 May/June 2015

Q115 · The table gives details of the balance of trade in the US in 2011 and 2012 9708/13 May/June 2015

22 The table gives details of the balance of trade in the US in 2011 and 2012. 2011 2012 value of goods exported (US$ millions) 1 496 000 1 561 000 value of goods imported (US$ millions) 2 240 000 2 303 000 balance of trade in goods (US$ millions) –744 000 –742 000 balance of trade in goods and services (US$ millions) –557 000 –535 000 What can be concluded about the US in 2012? A The balance of trade in goods worsened. B The balance of trade in services improved. C The prices of goods imported and exported increased. D The volumes of goods imported and exported increased.

1 marks

Answer: B

This question in 9708/13 May/June 2015

Q116 · The table shows indicators of a country’s economic performance over a two-year period 9708/13 May/June 2015

28 The table shows indicators of a country’s economic performance over a two-year period. balance of trade in exchange volume of volume of year goods and services rate index exports index imports index ($) 1 100 100 100 zero 2 100 90 100 +500 million What is consistent with the above information? A There has been a fall in the price of exports. B There has been an improvement in the terms of trade. C There has been an increase in the level of real income per head. D There has been an increase in the price of imports.

1 marks

Answer: B

This question in 9708/13 May/June 2015

Q117 · The table refers to a particular country 9708/11 Oct/Nov 2015

21 The table refers to a particular country. index of import index of export year prices prices (2010 = 100) (2010 = 100) 2005 48.1 57.0 2015 122.4 120.8 Which statement about the period 2005 to 2015 is correct? A The balance of payments worsened. B The balance of trade improved. C The exchange rate appreciated. D The terms of trade worsened.

1 marks

Answer: D

This question in 9708/11 Oct/Nov 2015

Q118 · A foreign government pays a UK university to educate its students 9708/11 Oct/Nov 2015

22 A foreign government pays a UK university to educate its students. How would this be recorded on the balance of payments current account of the UK? current account money flows component A current transfers inflow B current transfers outflow C trade in services inflow D trade in services outflow

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2015

Q119 · A Japanese company builds a factory in the UK to supply both the UK market and the market… 9708/11 Oct/Nov 2015

27 A Japanese company builds a factory in the UK to supply both the UK market and the market in the rest of Europe. What is likely to be the long-run impact on the UK’s balance of trade in goods and on its current account balance? balance of trade current account in goods balance A improve improve B improve uncertain C worsen improve D worsen uncertain

1 marks

Answer: B

This question in 9708/11 Oct/Nov 2015

Q120 · A Japanese car manufacturer established a successful factory in France 9708/12 Oct/Nov 2015

22 A Japanese car manufacturer established a successful factory in France. How would this be shown in the Japanese balance of payments? investment in the factory dividends and profits from the factory A negative entry in the financial account positive entry in the current account B negative entry in the current account positive entry in the financial account C positive entry in the financial account negative entry in the current account D positive entry in the current account negative entry in the financial account

1 marks

Answer: A

This question in 9708/12 Oct/Nov 2015

Q121 · At a time when international demand for oil was high, Bolivia encouraged investment by… 9708/12 Oct/Nov 2015

27 At a time when international demand for oil was high, Bolivia encouraged investment by foreign firms in order to exploit its oil and gas resources. What overall impact would this have on the balance of payments of Bolivia? A definitely favourable, as Bolivia could increase its exports of gas and oil B definitely unfavourable, as the foreign companies would transfer profits out of the country C uncertain, as there would be inflows and outflows of currency D zero, as Bolivia itself would use the gas and oil produced

1 marks

Answer: C

This question in 9708/12 Oct/Nov 2015

Q122 · In a time of recession, a government decided to sell a loss-making state-owned industry… 9708/12 Oct/Nov 2015

30 In a time of recession, a government decided to sell a loss-making state-owned industry to a foreign private company. What is the most likely immediate result? A an improvement in the financial account of the balance of payments B an improvement in the level of unemployment C an improvement in the rate of inflation D an improvement in the trade account of the balance of payments

1 marks

Answer: A

This question in 9708/12 Oct/Nov 2015

Q123 · For many years, Japan had a current account surplus which then became a current account… 9708/13 Oct/Nov 2015

27 For many years, Japan had a current account surplus which then became a current account deficit. What might explain this change? A Japan has faced deflation. B Japan has introduced protectionist policies. C Japan’s currency has depreciated. D Japanese manufacturing has lost its comparative advantage.

1 marks

Answer: D

This question in 9708/13 Oct/Nov 2015

Q124 · What would identify a country with a fundamental balance of payments disequilibrium? 9708/12 Feb/March 2016

22 What would identify a country with a fundamental balance of payments disequilibrium? A alternate annual deficits and surpluses in the current account B a continually growing balancing item C a large short-term outflow of foreign direct investment D a persistent rise in foreign currency reserves

1 marks

Answer: D

This question in 9708/12 Feb/March 2016

Q125 · If a country has a surplus in its balance of payments then its money supply is likely to… 9708/11 May/June 2016

23 If a country has a surplus in its balance of payments then its money supply is likely to A fall because more of its goods were purchased by foreign consumers than by consumers at home. B increase because the foreign currency received for exports will be exchanged for domestic currency. C remain constant because the surplus is automatically offset by a loan for the deficit countries. D remain unchanged because its exports are bought with foreign currency.

1 marks

Answer: B

This question in 9708/11 May/June 2016

Q126 · In July 2013, orders for durable US manufactured goods from computers to aircraft fell… 9708/12 May/June 2016

22 In July 2013, orders for durable US manufactured goods from computers to aircraft fell 7.3%, the biggest fall for a year. What might explain this change in trade and how would it have affected the US balance of payments? reason for change effect on balance of payments A an expansion in domestic production increased outflow in the current account B an expansion in foreign markets reduced inflow in the financial account C a recession in domestic production increased outflow in the financial account D a recession in foreign markets reduced inflow in the current account

1 marks

Answer: D

This question in 9708/12 May/June 2016

Q127 · Which policy, adopted by a government with the intention of reducing the rate of… 9708/12 May/June 2016

30 Which policy, adopted by a government with the intention of reducing the rate of inflation, might cause a greater deficit on the balance of payments? A higher foreign exchange rates for its currency B higher interest rates for domestic customers C higher subsidies to domestic producers D higher tax rates on consumer incomes

1 marks

Answer: A

This question in 9708/12 May/June 2016

Q128 · In August 2013, a Dutch insurer announced it wished to sell its South Korean Life… 9708/13 May/June 2016

22 In August 2013, a Dutch insurer announced it wished to sell its South Korean Life Insurance group to a South Korean company for $1.65 billion. How would such a sale be recorded on the Dutch balance of payments? A a negative entry in the direct investment section of the financial account B a negative entry in the investment income section of the current account C a positive entry in the direct investment section of the financial account D a positive entry in the investment income section of the current account

1 marks

Answer: C

This question in 9708/13 May/June 2016

Q129 · What would cause an immediate increase in the deficit in a country’s balance of payments… 9708/11 Oct/Nov 2016

22 What would cause an immediate increase in the deficit in a country’s balance of payments on the current account? A a rise in government expenditure on education B a rise in the cost of imported raw materials used in domestic production C a rise in the foreign ownership of domestic companies D a rise in the total wages earned by nationals working abroad

1 marks

Answer: B

This question in 9708/11 Oct/Nov 2016

Q130 · The table shows the Canadian current account of the balance of payments in 2005 and 2006 9708/11 Oct/Nov 2016

23 The table shows the Canadian current account of the balance of payments in 2005 and 2006. The change in which item contributed the most to the move from surplus to deficit in the Canadian current account balance between 2005 and 2006? 2005 2006 ($m) ($m) A balance of trade in goods 62 372 – 4 568 B balance of trade in services 12 055 –22 663 C investment income balance –22 917 –14 145 D transfers balance –1 498 –2 148 total 25 902 – 43 523

1 marks

Answer: A

This question in 9708/11 Oct/Nov 2016

Q131 · A country has no controls on transactions in foreign exchange and allows its exchange… 9708/11 Oct/Nov 2016

25 A country has no controls on transactions in foreign exchange and allows its exchange rate to float freely. What will always be zero? A net inward investment B the country’s foreign exchange reserves C the current account balance of payments position D the overall balance of payments position

1 marks

Answer: D

This question in 9708/11 Oct/Nov 2016

Q132 · The table shows items from the balance of payments for countries A, B, C and D 9708/12 Oct/Nov 2016

22 The table shows items from the balance of payments for countries A, B, C and D. Official financing including changes in reserves is excluded from the financial account. Which country has the greatest disequilibrium on its balance of payments? Current Account Capital Account Financial Account $ million $ million $ million A – 41 13 28 B –32 –5 –37 C –15 –17 4 D 44 12 25

1 marks

Answer: D

This question in 9708/12 Oct/Nov 2016

Q133 · What might increase a surplus on the current account of New Zealand’s balance of payments? 9708/13 Oct/Nov 2016

22 What might increase a surplus on the current account of New Zealand’s balance of payments? A increased earnings of Australians working in New Zealand B increased earnings of New Zealanders working abroad C increased spending by New Zealanders on holidays in Australia D increased transport of New Zealand goods using Chinese ships

1 marks

Answer: B

This question in 9708/13 Oct/Nov 2016

Q134 · How is the terms of trade index calculated? 9708/13 Oct/Nov 2016

25 How is the terms of trade index calculated? export price index A × 100 import price index export price index B × 100 quantity of exports traded import price index C × 100 export price index quantity of imports traded D × 100 quantity of exports traded

1 marks

Answer: A

This question in 9708/13 Oct/Nov 2016

Q135 · The table contains some figures from the 2014 balance of payments account of the United… 9708/12 Feb/March 2017

22 The table contains some figures from the 2014 balance of payments account of the United States (US). US$ million exports of goods 1 632 639 balance of trade in goods –741 462 imports of services 477 428 balance of trade in services 233 138 What cannot be concluded about US trade in 2014 from the table? A Exported services were valued at over US$477 428. B Imported goods were valued at over US$1 632 639. C The value of exported services was less than the value of exported goods. D There was an overall current account deficit.

1 marks

Answer: D

This question in 9708/12 Feb/March 2017

Q136 · A country has a fixed exchange rate 9708/12 Feb/March 2017

23 A country has a fixed exchange rate. What is likely to result in a deterioration in its balance of payments? A a decrease in interest rates in foreign countries B a decrease in the country’s interest rates C a decrease in the country’s National Income D an increase in the income of foreign countries

1 marks

Answer: B

This question in 9708/12 Feb/March 2017

Q137 · The table gives the Terms of Trade Index in 2010 and 2013 for Japan and Venezuela 9708/12 Feb/March 2017

25 The table gives the Terms of Trade Index in 2010 and 2013 for Japan and Venezuela. Terms of Trade (2000=100) 2010 2013 Venezuela 215.9 254.6 Japan 67.7 59.0 Which combination of statements is a correct interpretation of the changes between 2010 and 2013? can buy more imports import prices have risen per unit of exports faster than export prices A Japan Japan B Japan Venezuela C Venezuela Japan D Venezuela Venezuela

1 marks

Answer: C

This question in 9708/12 Feb/March 2017

Q138 · A government succeeds in changing a current account deficit into a current account surplus 9708/11 May/June 2017

21 A government succeeds in changing a current account deficit into a current account surplus. Why might this current account surplus increase the country’s inflation rate? A It raises aggregate demand. B It raises production costs. C It reduces the exchange rate. D It reduces the money supply.

1 marks

Answer: A

This question in 9708/11 May/June 2017

Q139 · The diagram shows Greece’s trade position with the EU and Russia between 2005 and 2014 9708/11 May/June 2017

22 The diagram shows Greece’s trade position with the EU and Russia between 2005 and 2014. 60 key Greek 50 imports from EU trade 40 exports to EU $bn imports from Russia 30 exports to Russia 20 10 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 What can be concluded about the period 2005 to 2014? A Greece’s annual trade deficit with the EU rose continuously. B Greece’s annual trade deficit with the EU was lower in 2014 than in 2005. C Greece’s annual trade deficit with the EU fell continuously. D Greece’s annual trade deficit with the EU was smaller than its deficit with Russia.

1 marks

Answer: B

This question in 9708/11 May/June 2017

Q140 · There is a rise in the exchange rate of the US$ 9708/11 May/June 2017

23 There is a rise in the exchange rate of the US$. Which would cause the greatest increase in the US current account deficit? A a high level of domestic unemployment B a high price elasticity of demand for imports C a low price elasticity of demand for exports D a low rate of domestic inflation

1 marks

Answer: B

This question in 9708/11 May/June 2017

Q141 · The table gives information about the trade between Singapore and New Zealand during… 9708/12 May/June 2017

22 The table gives information about the trade between Singapore and New Zealand during 2001, the first year after they signed a free trade agreement. The values are given both in Singapore dollars (S$) and New Zealand dollars (NZ$). percentage change S$ m NZ$ m from 2000 Singapore exports to New Zealand 508 618 +20% Singapore imports from New Zealand 331 403 –17% What can be concluded from the table? A New Zealand gained more than Singapore from the trade agreement. B New Zealand’s trade position with Singapore improved in 2001. C Singapore had a trade surplus with New Zealand in 2001. D The exchange rate in 2001 was approximately NZ$ 1 = S$ 1.2.

1 marks

Answer: C

This question in 9708/12 May/June 2017

Q142 · An Indian multinational company receives profits from its factories based in the UK 9708/13 May/June 2017

22 An Indian multinational company receives profits from its factories based in the UK. It then buys a US-owned firm based in the UK. How will these transactions appear in India’s balance of payments? the remittance of profit the purchase of the US-owned firm A a credit item in the current account a debit item in the financial account B a credit item in the financial account a debit item in the current account C a debit item in the current account a credit item in the financial account D a debit item in the financial account a credit item in the current account

1 marks

Answer: A

This question in 9708/13 May/June 2017

Q143 · In 2014 a rich foreign businessman bought a UK football club 9708/11 Oct/Nov 2017

22 In 2014 a rich foreign businessman bought a UK football club. What would have been the immediate effect of such an investment? A a fall in the demand for footballers in the UK B a fall in the earnings of footballers in the UK C an inflow in the UK balance of payments D an inflow in the UK balance of trade

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2017

Q144 · What does the current account of the balance of payments include? 9708/12 Oct/Nov 2017

21 What does the current account of the balance of payments include? A government reserves and foreign aid B government revenue and government spending C imports and exports of goods and services D inflows and outflows of trade and capital

1 marks

Answer: C

This question in 9708/12 Oct/Nov 2017

Q145 · The diagram shows Greece’s trade position with the EU and Russia between 2005 and 2014 9708/13 Oct/Nov 2017

22 The diagram shows Greece’s trade position with the EU and Russia between 2005 and 2014. 60 Greek key trade 50 imports from EU $bn 40 exports to EU imports from Russia 30 exports to Russia 20 10 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 What happened to Greek trade balances over this period? balance with the EU balance with Russia A an increased deficit an increased surplus B an increased surplus a reduced surplus C a reduced deficit an increased deficit D a reduced surplus a reduced deficit

1 marks

Answer: C

This question in 9708/13 Oct/Nov 2017

Q146 · In 2014 Australia and China negotiated a trade agreement 9708/12 Feb/March 2018

23 In 2014 Australia and China negotiated a trade agreement. This removed Chinese tariffs on 95% of Australian exports in exchange for greater access to the Australian economy for Chinese investors. How would the agreement be expected to affect the Australian balance of payments in the short run? current account financial account A greater inflow greater inflow B greater inflow greater outflow C greater outflow greater inflow D greater outflow greater outflow

1 marks

Answer: A

This question in 9708/12 Feb/March 2018

Q147 · The table shows the terms of trade for Saudi Arabia 9708/12 Feb/March 2018

25 The table shows the terms of trade for Saudi Arabia. date terms of trade 2000 100 2010 105 2015 137 What can be concluded from the table for Saudi Arabia? A Export prices rose relative to import prices. B The balance of trade surplus increased. C The volume of exports exceeded the volume of imports. D The volume of exports rose faster than the volume of imports.

1 marks

Answer: A

This question in 9708/12 Feb/March 2018

Q148 · A country has a deficit on the current account of the balance of payments 9708/12 Feb/March 2018

29 A country has a deficit on the current account of the balance of payments. Which policy would be expected to increase the deficit? A an appreciation of the exchange rate B an increase in domestic productivity C an introduction of import quotas D a rise in subsidies to domestic firms

1 marks

Answer: A

This question in 9708/12 Feb/March 2018

Q149 · The table shows trade in goods and services for a selection of countries in 2005 and 2014 9708/11 May/June 2018

22 The table shows trade in goods and services for a selection of countries in 2005 and 2014. trade in goods and services (US$ millions) 2005 2014 exports imports exports imports Argentina 46 892 34 797 82 026 79 194 Brazil 133 055 96 611 264 063 318 799 Ecuador 11 480 11 851 28 935 30 215 Mexico 230 369 245 100 418 952 433 977 What can be concluded about the balances of trade in goods and services from the table? A Argentina had a larger surplus in 2014 than in 2005. B Brazil had a surplus in 2005 and a deficit in 2014. C Ecuador had a deficit in 2005 and a surplus in 2014. D Mexico had a larger deficit in 2005 than in 2014.

1 marks

Answer: B

This question in 9708/11 May/June 2018

Q150 · The terms of trade for a country have improved 9708/11 May/June 2018

24 The terms of trade for a country have improved. Which combination of price behaviour would have caused this? average price average price of exports of imports A decrease 4% decrease 6% B decrease 4% unchanged C increase 4% increase 6% D unchanged increase 2%

1 marks

Answer: A

This question in 9708/11 May/June 2018

Q151 · The demand for a country’s exports is price-elastic 9708/11 May/June 2018

27 The demand for a country’s exports is price-elastic. What will be the effect of introducing export subsidies on its balance of trade and on its terms of trade? balance of trade terms of trade A improve improve B improve worsen C worsen improve D worsen worsen

1 marks

Answer: B

This question in 9708/11 May/June 2018

Q152 · The table shows all of the items on the current account of a country’s balance of payments 9708/12 May/June 2018

22 The table shows all of the items on the current account of a country’s balance of payments. $ million exports of goods 143 imports of goods 156 exports of services 75 imports of services 72 net transfers +5 What is the value of the current account balance? A $5 m deficit B $10 m deficit C $13 m deficit D $3 m surplus

1 marks

Answer: A

This question in 9708/12 May/June 2018

Q153 · The table shows an extract from a country's current account of its balance of payments… 9708/13 May/June 2018

21 The table shows an extract from a country's current account of its balance of payments accounts. credits $ million export of goods G export of services 204 465 total exports of goods and services 511 275 debits $ million import of goods 417 006 import of services 126 369 total imports of goods and services 543 375 balance $ million trade in goods –110 196 trade in services H total trade in goods and services –32 100 What is the value of export of goods, G, and what is the value of the balance of trade in services, H? export of goods, G trade in services, H $ million $ million A 306 810 78 096 B 306 810 142 296 C 715 740 78 096 D 715 740 142 296

1 marks

Answer: A

This question in 9708/13 May/June 2018

Q154 · The table shows selected items of the balance of payments of a country in 2015 9708/11 Oct/Nov 2018

22 The table shows selected items of the balance of payments of a country in 2015. $ billions net portfolio investment +40 trade in goods –100 trade in services +50 interest, profit and dividends (primary income) +10 current transfers (secondary income) +10 transactions in financial assets –10 What was the country’s current account balance in 2015? A –$40 billion B –$30 billion C –$20 billion D –$10 billion

1 marks

Answer: B

This question in 9708/11 Oct/Nov 2018

Q155 · What is likely to explain an increase in the deficit on a country’s current account of… 9708/11 Oct/Nov 2018

23 What is likely to explain an increase in the deficit on a country’s current account of the balance of payments? A an increase in government foreign aid to countries abroad B an increase in government tax rates C an increase in other countries’ exchange rates D an increase in the proportion of income saved by the country’s residents

1 marks

Answer: A

This question in 9708/11 Oct/Nov 2018

Q156 · Which item is not included in the current account of a country’s balance of payments? 9708/12 Oct/Nov 2018

22 Which item is not included in the current account of a country’s balance of payments? A exports of services B interest on foreign loans C profits from foreign investments D the purchase of foreign assets

1 marks

Answer: D

This question in 9708/12 Oct/Nov 2018

Q157 · The index for a country’s terms of trade changed from 100 in year 2015, to 104 in year… 9708/12 Oct/Nov 2018

25 The index for a country’s terms of trade changed from 100 in year 2015, to 104 in year 2016. What could have caused this change? A a fall in export prices with import prices unchanged B a fall in revenue from the export of services C an appreciation of the country’s currency D a rise in the value of imports

1 marks

Answer: C

This question in 9708/12 Oct/Nov 2018

Q158 · The balance of payments accounts are arranged in the following way 9708/13 Oct/Nov 2018

22 The balance of payments accounts are arranged in the following way. Which total is the current account balance? balance of trade in goods + balance of trade in services = total A + net income (primary income) = total B + net transfers (secondary income) = total C + capital balance = total D financial balance errors and omissions

1 marks

Answer: C

This question in 9708/13 Oct/Nov 2018

Q159 · What will definitely lead to an improvement in the terms of trade? 9708/12 Feb/March 2019

19 What will definitely lead to an improvement in the terms of trade? A Export prices fall whilst import prices rise. B Export prices rise by the same amount as import prices. C Export prices rise slower than import prices. D Export prices rise whilst import prices stay the same.

1 marks

Answer: D

This question in 9708/12 Feb/March 2019

Q160 · The terms of trade of a developing country fell from 90 in 2010 to 80 in 2015 9708/12 Feb/March 2019

25 The terms of trade of a developing country fell from 90 in 2010 to 80 in 2015. Assuming the index of its import prices remained constant at 110 between these two years, what happened to its index of export prices? A fell by 10 B fell by 11 C increased by 10 D increased by 30

1 marks

Answer: B

This question in 9708/12 Feb/March 2019

Q161 · Why may a government seek to reduce a current account surplus on the balance of payments? 9708/12 Feb/March 2019

30 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

1 marks

Answer: A

This question in 9708/12 Feb/March 2019

Q162 · The table shows selected balances from a country’s balance of payments account in 2016 9708/11 May/June 2019

26 The table shows selected balances from a country’s balance of payments account in 2016. $US billions trade in goods –30 trade in services +10 primary income balance +10 secondary income balance –8 capital & financial flow +15 What was the country’s current account balance in 2016? A –$3 billion B –$10 billion C –$18 billion D –$20 billion

1 marks

Answer: C

This question in 9708/11 May/June 2019

Q163 · What is not an item in a country’s current account of its balance of payments? 9708/12 May/June 2019

21 What is not an item in a country’s current account of its balance of payments? A exports of primary commodities B money received from banking services C overseas investment D profits sent back by companies overseas

1 marks

Answer: C

This question in 9708/12 May/June 2019

Q164 · A British citizen buys a house in the US which he rents to American citizens in order to… 9708/12 May/June 2019

26 A British citizen buys a house in the US which he rents to American citizens in order to receive an income for himself. Where will the initial purchase and then the rent be recorded on the UK balance of payments? initial purchase rent A capital account export current account import B capital account import current account export C current account export capital account import D current account import capital account export

1 marks

Answer: B

This question in 9708/12 May/June 2019

Q165 · The current account of the balance of payments for Nigeria changed from US$899 m in 2014… 9708/13 May/June 2019

21 The current account of the balance of payments for Nigeria changed from US$899 m in 2014 to US$ –15 763 m in 2015. Assuming that nothing else changes, what is likely to be the impact in 2015 on GDP and the exchange rate in Nigeria? GDP exchange rate A falls appreciates B falls depreciates C rises appreciates D rises depreciates

1 marks

Answer: B

This question in 9708/13 May/June 2019

Q166 · An Australian family purchases a holiday to New Zealand and an Australian mining company… 9708/13 May/June 2019

25 An Australian family purchases a holiday to New Zealand and an Australian mining company sells coal to China. Four students, A, B, C and D, are asked where these transactions appear in the current account of Australia’s balance of payments. Which student is correct? holiday to coal to China New Zealand A service export good export B service export good import C service import good export D service import good import

1 marks

Answer: C

This question in 9708/13 May/June 2019

Q167 · When will the imposition of a tariff by a country on the goods and services of its major… 9708/11 Oct/Nov 2019

19 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

1 marks

Answer: B

This question in 9708/11 Oct/Nov 2019

Q168 · What is most likely to lead to a persistent surplus in a country’s current account of its… 9708/11 Oct/Nov 2019

22 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

1 marks

Answer: B

This question in 9708/11 Oct/Nov 2019

Q169 · What would not be included in Germany’s balance of payments accounts? 9708/11 Oct/Nov 2019

27 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

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2019

Q170 · ‘Primary income’ and ‘secondary income’ are components of the current account of the… 9708/12 Oct/Nov 2019

19 ‘Primary income’ and ‘secondary income’ are components of the current account of the balance of payments. What do these represent? primary income secondary income A capital flows financial flows B goods balance services balance C income flows current transfers D private flows government flows

1 marks

Answer: C

This question in 9708/12 Oct/Nov 2019

Q171 · A foreign government pays a UK university to educate its students 9708/12 Oct/Nov 2019

25 A foreign government pays a UK university to educate its students. How would this be recorded on the balance of payments current account of the UK? current account money flows component A secondary income inflow B secondary income outflow C trade in services inflow D trade in services outflow

1 marks

Answer: C

This question in 9708/12 Oct/Nov 2019

Q172 · An economy’s current account on the balance of payments is in surplus 9708/12 Oct/Nov 2019

29 An economy’s current account on the balance of payments is in surplus. The exchange rate is revalued by the government. Assume the Marshall-Lerner condition holds. Which diagram shows the impact on the current account balance? current A current B account account balance balance surplus + surplus + O O time time deficit – deficit – current C current D account account balance balance surplus + surplus + O O time time deficit – deficit –

1 marks

Answer: A

This question in 9708/12 Oct/Nov 2019

Q173 · Singapore imports almost all of its raw materials and its exports are a high percentage… 9708/13 Oct/Nov 2019

19 Singapore imports almost all of its raw materials and its exports are a high percentage of its GDP. The price elasticity of demand for exports and the price elasticity of demand for imports are each less than 1. What would be the likely impact of a depreciation of the Singapore dollar? A The domestic inflation rate would fall. B The government’s budget deficit would move to surplus. C The price of imports would fall. D The value of exports would fall.

1 marks

Answer: D

This question in 9708/13 Oct/Nov 2019

Q174 · Which change is most likely to result in a worsening of a country’s balance of payments? 9708/13 Oct/Nov 2019

24 Which change is most likely to result in a worsening of a country’s balance of payments? A a reduction in remittances from citizens who work abroad B a rise in domestic rates of direct taxation C an expansion in the economy of a major trading partner D an increase in domestic interest rates

1 marks

Answer: A

This question in 9708/13 Oct/Nov 2019

Q175 · What is the most likely consequence of an appreciation in the value of the Malaysian… 9708/13 Oct/Nov 2019

26 What is the most likely consequence of an appreciation in the value of the Malaysian ringgit? A a decline in the level of unemployment in Malaysia B a fall in the rate of growth of the general price level in Malaysia C a reduction in the volume of imports into Malaysia D an improvement in the Malaysian balance of trade in services

1 marks

Answer: B

This question in 9708/13 Oct/Nov 2019

Q176 · What will lead to an immediate improvement in the balance of payments deficit on current… 9708/12 Feb/March 2020

19 What will lead to an immediate improvement in the balance of payments deficit on current account? A a fall in interest rates B a reduction in dividend payments to foreign investors C a reduction in the standard rate of income tax D an increase in the level of government current expenditure

1 marks

Answer: B

This question in 9708/12 Feb/March 2020

Q177 · The diagram shows Greece’s trade position with the EU between 2005 and 2014 9708/12 Feb/March 2020

22 The diagram shows Greece’s trade position with the EU between 2005 and 2014. 60 Greek trade 50 key $bn 40 imports from EU 30 exports to EU 20 10 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 How does the Greek trade balance with the EU differ in 2014 compared to 2005? A an increased deficit B an increased surplus C a reduced deficit D a reduced surplus

1 marks

Answer: C

This question in 9708/12 Feb/March 2020

Q178 · In 2018 an investor in the United States (US) purchased shares in a German bank 9708/12 Feb/March 2020

25 In 2018 an investor in the United States (US) purchased shares in a German bank. In December 2018 the US investor was paid a dividend on these shares. How were these activities recorded in the US balance of payments for 2018? share purchase dividend payment A capital account credit current account credit B capital account credit current account debit C capital account debit current account credit D capital account debit current account debit

1 marks

Answer: C

This question in 9708/12 Feb/March 2020

Q179 · The table shows the goods balance and services balance for a country in selected years 9708/11 May/June 2020

23 The table shows the goods balance and services balance for a country in selected years. goods balance services balance year ($ billion) ($ billion) 2015 +120 –30 2016 +110 –30 2017 +50 –10 2018 +130 –60 2019 +140 –50 Between which years did the overall goods and services balance change the most? A 2015 to 2016 B 2016 to 2017 C 2017 to 2018 D 2018 to 2019

1 marks

Answer: B

This question in 9708/11 May/June 2020

Q180 · Which components are included in the financial account of the balance of payments? 9708/12 May/June 2020

21 Which components are included in the financial account of the balance of payments? the balancing foreign direct interest, profits item investment and dividends A v Jv x key B v x x ¥ = included Cc x v v X = not included D x x J

1 marks

Answer: A

This question in 9708/12 May/June 2020

Q181 · The table shows an extract from a country’s balance of payments 9708/13 May/June 2020

24 The table shows an extract from a country’s balance of payments. exports imports $ billion $ billion trade in goods 150 200 trade in services 70 50 primary (investment) income 120 100 secondary (transfer) income 15 20 What is the current account balance? A –$10 bn B –$15 bn C –$30 bn D –$50 bn

1 marks

Answer: B

This question in 9708/13 May/June 2020

Q182 · A country has a deficit of $300 million on the current account of its balance of payments 9708/11 Oct/Nov 2020

23 A country has a deficit of $300 million on the current account of its balance of payments. It devalues its currency in an attempt to reduce the deficit. Which row is consistent with the idea that the J-curve operates in the short run but the Marshall-Lerner condition is satisfied in the long run? short-run deficit long-run deficit ($ million) ($ million) A 200 100 B 200 400 C 600 100 D 600 400

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2020

Q183 · A family takes a holiday abroad 9708/11 Oct/Nov 2020

24 A family takes a holiday abroad. Four students are asked to show where the cost of the accommodation would be recorded in the current account of the balance of payments of the country visited. Which student is correct? trade in goods trade in services export/ credit import/ debit A v x Jv x B J x x J Cc x Jv Jv x D x Jv x Jv

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2020

Q184 · When is a deficit on the current account of the balance of payments likely to worsen? 9708/11 Oct/Nov 2020

26 When is a deficit on the current account of the balance of payments likely to worsen? A when a government adopts a deflationary macroeconomic policy B when a government subsidises exports C when prices of essential imported raw materials increase significantly D when tariffs are placed on imported products with a wide range of domestic substitutes

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2020

Q185 · The table shows an approximate summary of the current account of the balance of payments… 9708/12 Oct/Nov 2020

22 The table shows an approximate summary of the current account of the balance of payments for Thailand. Bank of Thailand current account (millions of US dollars) April 2018 1 exports 18 990 2 imports 18 715 3 trade balance 275 net services, primary income 4 1130 and secondary income What is the current account balance, in millions of US dollars? A –855 B 1405 C 1680 D 39 110

1 marks

Answer: B

This question in 9708/12 Oct/Nov 2020

Q186 · The table gives figures from the current account of the balance of payments for New… 9708/13 Oct/Nov 2020

22 The table gives figures from the current account of the balance of payments for New Zealand in 2018. There are two blank spaces, X and Y, in the account. NZ$(millions) exports of goods 54 700 imports of goods 57 400 balance of trade in goods X balance of trade in services Y primary income balance –10 600 secondary income balance –400 current account balance –8 500 Four students were asked to fill in the spaces. Which student was correct? X Y A +2700 +5200 B +2700 –5200 C –2700 +5200 D –2700 –5200

1 marks

Answer: C

This question in 9708/13 Oct/Nov 2020

Q187 · A country’s terms of trade changed from 100 to 95 9708/12 Feb/March 2021

20 A country’s terms of trade changed from 100 to 95. What is most likely to have caused this change? A a depreciation of the country’s currency B a reduction in import tariffs C a rise in the price of exported goods D an improvement in the balance of trade

1 marks

Answer: A

This question in 9708/12 Feb/March 2021

Q188 · Which item should be recorded in the financial account of a country’s balance of payments? 9708/12 Feb/March 2021

25 Which item should be recorded in the financial account of a country’s balance of payments? A foreign aid by China to assist in infrastructure projects in African countries B investments by Middle Eastern oil producing countries through the purchase of land and property assets in Europe C payments by the USA to other countries which house American military bases D profits and dividends paid by multinational companies based in Indonesia to shareholders in Asia

1 marks

Answer: B

This question in 9708/12 Feb/March 2021

Q189 · The figures shown are from New Zealand’s balance of payments for 2017 according to data… 9708/12 May/June 2021

23 The figures shown are from New Zealand’s balance of payments for 2017 according to data published by Stats NZ in September 2018. NZ$m capital account balance 1300 current account balance –7000 financial account balance 7600 goods balance –3000 services balance 5000 What was the value of the balancing item (net errors and omissions) in NZ$m? A –3900 B –2000 C –1900 D 5700

1 marks

Answer: C

This question in 9708/12 May/June 2021

Q190 · Between 2011 and 2013, retailers reported that expenditure on domestically-produced and… 9708/12 May/June 2021

26 Between 2011 and 2013, retailers reported that expenditure on domestically-produced and imported goods had reduced. This was because consumers did not take out loans as the economy was in a recession. What is the likely result of this? A a decline in the deficit in the trade account B a decline in the level of savings C a decline in the terms of trade D a decline in unemployment

1 marks

Answer: A

This question in 9708/12 May/June 2021

Q191 · Increased international competition leads to a worsening in a country’s current account… 9708/12 May/June 2021

27 Increased international competition leads to a worsening in a country’s current account balance. In the absence of any offsetting factors, how is this likely to affect the exchange rate and domestic cost-push inflation? cost-push exchange rate inflation A appreciate decrease B appreciate increase C depreciate decrease D depreciate increase

1 marks

Answer: D

This question in 9708/12 May/June 2021

Q192 · A country with a fixed exchange rate experiences a higher rate of inflation than its… 9708/13 May/June 2021

21 A country with a fixed exchange rate experiences a higher rate of inflation than its trading partners. What is the likely effect on the country’s volume of exports and imports? exports imports A decrease decrease B decrease increase C increase decrease D increase increase

1 marks

Answer: B

This question in 9708/13 May/June 2021

Q193 · A developed country has a price-inelastic demand for oil, all of which it imports 9708/11 Oct/Nov 2021

22 A developed country has a price-inelastic demand for oil, all of which it imports. The oil-producing countries increase the supply of oil. What is likely to happen to the developed country’s rate of inflation and its balance of trade? rate of inflation balance of trade A decreases improves B decreases worsens C increases improves D increases worsens

1 marks

Answer: A

This question in 9708/11 Oct/Nov 2021

Q194 · A resident of country X buys shares in a firm in country Y 9708/11 Oct/Nov 2021

25 A resident of country X buys shares in a firm in country Y. The shares then pay the resident a dividend. Where are these two flows recorded in country X’s balance of payments? purchase dividend A capital account primary income (income) B capital account secondary income (current transfers) C financial account primary income (income) D financial account secondary income (current transfers)

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2021

Q195 · The balance of payments on the current account for Guatemala in 2011 was –US$1.6 bn and… 9708/11 Oct/Nov 2021

29 The balance of payments on the current account for Guatemala in 2011 was –US$1.6 bn and in 2016 was +US$1.0 bn. What is most likely to have been a contributory factor to this change in the balance of payments on the current account over this five-year period? A an appreciation of Guatemala’s currency B a growth of household incomes in Guatemala C a lowering of tariffs on goods imported into Guatemala D productivity improvements in Guatemala’s export sector

1 marks

Answer: D

This question in 9708/11 Oct/Nov 2021

Q196 · Why is it that a country’s balance of payments must always balance? 9708/12 Oct/Nov 2021

21 Why is it that a country’s balance of payments must always balance? A Exchange rate changes will correct any deficit or surplus. B One country’s deficit is balanced by another country’s surplus. C The current account is balanced by the capital and financial accounts. D The government must act to correct any disequilibrium.

1 marks

Answer: C

This question in 9708/12 Oct/Nov 2021

Q197 · The demand for a country’s exports is price-elastic 9708/13 Oct/Nov 2021

20 The demand for a country’s exports is price-elastic. Its government introduces export subsidies. What will be the effect on its balance of trade and on its terms of trade? balance of trade terms of trade A increase increase B increase decrease C decrease increase D decrease decrease

1 marks

Answer: B

This question in 9708/13 Oct/Nov 2021

Q198 · The table shows the average changes in the prices and volumes of exports and imports 9708/13 Oct/Nov 2021

21 The table shows the average changes in the prices and volumes of exports and imports. Which combination of changes would result in an increase in the terms of trade? export export import import prices volumes prices volumes A –10% +15% –15% +10% B –3% +6% –2% +1% C +5% –5% +6% –1% D +10% –5% +12% –6%

1 marks

Answer: A

This question in 9708/13 Oct/Nov 2021

Q199 · The graph shows the change in the current account of Belgium’s balance of payments from… 9708/13 Oct/Nov 2021

27 The graph shows the change in the current account of Belgium’s balance of payments from 2016 to 2017. 3.6 US$ billion 0 –2.8 2016 2017 What will be the most likely impact of the change shown by the graph on Belgium’s domestic economy? A a fall in the rate of economic growth B a fall in the foreign currency reserves C a fall in the number of unemployed D a fall in the rate of inflation

1 marks

Answer: C

This question in 9708/13 Oct/Nov 2021

Q200 · Which item is not included in the current account on the balance of payments statement? 9708/12 Feb/March 2022

24 Which item is not included in the current account on the balance of payments statement? A the balancing item B the export of services C the import of goods D the interest received from investment overseas

1 marks

Answer: A

This question in 9708/12 Feb/March 2022

Q201 · The prices of a country’s exports rise by 5% while the prices of its imports fall by 5% 9708/12 Feb/March 2022

25 The prices of a country’s exports rise by 5% while the prices of its imports fall by 5%. What will definitely improve in the country as a result of these changes? A balance of trade B current account balance C exchange rate D terms of trade

1 marks

Answer: D

This question in 9708/12 Feb/March 2022

Q202 · Why might a country’s government impose a tax on fuel exports? 9708/11 May/June 2022

23 Why might a country’s government impose a tax on fuel exports? A to encourage domestic refineries to increase production B to improve the country’s trade balance C to reduce fuel prices for domestic consumers D to reduce the government’s budget surplus

1 marks

Answer: C

This question in 9708/11 May/June 2022

Q203 · What leads to a fall in a country’s terms of trade? 9708/11 May/June 2022

24 What leads to a fall in a country’s terms of trade? A a fall in the price of exports relative to the price of imports B a fall in the price of imports relative to the price of exports C a fall in the quantity of exports relative to the quantity of imports D a fall in the quantity of imports relative to the quantity of exports

1 marks

Answer: A

This question in 9708/11 May/June 2022

Q204 · The diagram has three lines that show the values of an economy’s exports, imports and… 9708/11 May/June 2022

25 The diagram has three lines that show the values of an economy’s exports, imports and trade balance between 2011 and 2019. $m + 1 2 3 0 – 2011 2015 2019 year How should the lines be labelled? line 1 line 2 line 3 A exports imports trade balance B exports trade balance imports C imports exports trade balance D imports trade balance exports

1 marks

Answer: B

This question in 9708/11 May/June 2022

Q205 · In 2020, shops reported a fall in sales as domestic demand in an economy fell 9708/12 May/June 2022

19 In 2020, shops reported a fall in sales as domestic demand in an economy fell. However, the impact on the overall economy was not as unfavourable as was first feared. What might have lessened the impact on the economy? A Exports increased. B Imports increased. C Savings increased. D Taxes increased.

1 marks

Answer: A

This question in 9708/12 May/June 2022

Q206 · The data in the table is extracted from the Singapore Balance of Payments for 2019 9708/13 May/June 2022

22 The data in the table is extracted from the Singapore Balance of Payments for 2019. $m goods balance +134 000 services balance +8 000 capital and financial account (net) +95 000 balancing item –3 000 What was the value ($m) of the trade balance on the current account in 2019? A 126 000 B 142 000 C 234 000 D 237 000

1 marks

Answer: B

This question in 9708/13 May/June 2022

Q207 · Which change will not affect the balance of payments current account? 9708/14 May/June 2022

19 Which change will not affect the balance of payments current account? A a rise in export and import prices B a rise in foreign aid flows C a rise in international exchange rates D a rise in foreign direct investment

1 marks

Answer: D

This question in 9708/14 May/June 2022

Q208 · The diagrams show initial equilibrium positions at Y1P1 9708/11 Oct/Nov 2022

22 The diagrams show initial equilibrium positions at Y1P1. Which diagram reflects the impact on an economy of higher unit wage costs and an improvement in the balance of trade? A B SRAS2 SRAS2 price price level level SRAS1 P2 SRAS1 P2 P1 AD1 AD2 P1 AD AD2 AD2 AD AD2 AD1 O Y2 Y1 O Y2 Y1 real real GDP GDP C D SRAS1 SRAS1 price price SRAS2 level level P1 SRAS2 P1 P2 AD2 AD1 P2 AD1 AD AD2 AD AD2 AD2 O Y1 Y2 O Y1 Y2 real real GDP GDP

1 marks

Answer: B

This question in 9708/11 Oct/Nov 2022

Q209 · The table shows information from the current account of the balance of payments for… 9708/11 Oct/Nov 2022

23 The table shows information from the current account of the balance of payments for Canada and Singapore in 2019. Canada Singapore (US$ million) (US$ million) exports of goods 448 360 440 800 imports of goods 462 105 342 805 exports of services 100 350 204 810 imports of services 115 270 119 050 primary income balance –3 475 –34 340 secondary income balance –2 060 –6 280 What can be concluded from the table? A Canada exported more goods than Singapore. B Canada and Singapore had current account deficits. C Singapore had a surplus on its trade in goods and services. D Singapore imported cheaper goods than Canada.

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2022

Q210 · What is likely to explain an increase in the deficit on a country’s current account of… 9708/11 Oct/Nov 2022

26 What is likely to explain an increase in the deficit on a country’s current account of the balance of payments? A an increase in government foreign aid to countries abroad B an increase in government tax rates C an increase in other countries’ exchange rates D an increase in the proportion of income saved by the country’s residents

1 marks

Answer: A

This question in 9708/11 Oct/Nov 2022

Q211 · Trade in services is a component of the current account of the balance of payments 9708/13 Oct/Nov 2022

25 Trade in services is a component of the current account of the balance of payments. What is an example of a trade in services? A development aid for foreign countries B export revenue from primary commodities C income from foreign tourists D income from overseas investments

1 marks

Answer: C

This question in 9708/13 Oct/Nov 2022

Q212 · The table shows data on the Japanese balance of trade in goods 9708/11 May/June 2023

22 The table shows data on the Japanese balance of trade in goods. exchange rate exports imports year yen / dollar $bn $bn 2016 109 635 585 2017 111 689 645 What can be concluded from this data? A The demand for Japanese exports was price inelastic. B The Japanese current account was in surplus. C The majority of Japanese imports were essential goods. D The Marshall–Lerner condition for Japan is greater than 1.

1 marks

This question in 9708/11 May/June 2023

Q213 · A country with a floating exchange rate experiences a large surplus on the current… 9708/11 May/June 2023

25 A country with a floating exchange rate experiences a large surplus on the current account of its balance of payments. What is likely to decrease as a consequence? A the exports of capital from the country B the level of employment in the country C the prices of imports into the country D the value of the country’s currency

1 marks

Answer: C

This question in 9708/11 May/June 2023

Q214 · A country experiences a fall in the value of exports and an increase in the value of… 9708/11 May/June 2023

29 A country experiences a fall in the value of exports and an increase in the value of imports of goods and services. What are the effects of these changes? balance of aggregate payments on demand goods and services A fall improve B fall worsen C rise improve D rise worsen

1 marks

Answer: B

This question in 9708/11 May/June 2023

Q215 · The table contains some figures from the balance of payments account of the United States… 9708/12 May/June 2023

17 The table contains some figures from the balance of payments account of the United States (US) for a given year. US$ million exports of goods 1 632 639 balance of trade in goods –741 462 imports of services 477 428 balance of trade in services 233 138 What cannot be concluded about US trade from the table? A Exported services were valued at over US$477 428. B Imported goods were valued at over US$1 632 639. C The value of exported services was less than the value of exported goods. D There was an overall current account deficit.

1 marks

Answer: D

This question in 9708/12 May/June 2023

Q216 · Which combination of policies would be most effective in reducing a balance of payments… 9708/12 May/June 2023

23 Which combination of policies would be most effective in reducing a balance of payments current account surplus? a decrease in a devaluation of the an expansionary tariffs on imports exchange rate monetary policy A no yes no B no no yes C yes no yes D yes yes no

1 marks

Answer: C

This question in 9708/12 May/June 2023

Q217 · A government wishes to reduce the deficit on the secondary income section of its current… 9708/12 May/June 2023

28 A government wishes to reduce the deficit on the secondary income section of its current account. Which policy would be most effective? A an increase in subsidies to exporters B an increase in the tariffs on imports C a reduction in the number of migrant workers allowed into the country D a reduction in overseas aid donations

1 marks

Answer: D

This question in 9708/12 May/June 2023

Q218 · A Bangladeshi citizen is employed as a construction worker in Qatar 9708/13 May/June 2023

17 A Bangladeshi citizen is employed as a construction worker in Qatar. He sends some of his wages to his family in Bangladesh. How will this be recorded on Qatar’s balance of payments? A as part of the balance of trade in services B as part of net primary income C as part of net secondary income D as part of the financial account

1 marks

Answer: B

This question in 9708/13 May/June 2023

Q219 · Which item is not included in the current account of a country’s balance of payments? 9708/11 Oct/Nov 2023

22 Which item is not included in the current account of a country’s balance of payments? A exports of services B interest on foreign loans C profits from foreign investments D the purchase of foreign assets

1 marks

Answer: D

This question in 9708/11 Oct/Nov 2023

Q220 · A Kenyan banker who lives and works in India sends 15% of their wage back to Kenya every… 9708/11 Oct/Nov 2023

26 A Kenyan banker who lives and works in India sends 15% of their wage back to Kenya every month. What would be the change in the current account components for either country? A a fall in secondary income for India B an increase in the balance of trade in services for Kenya C an increase in the current account surplus for India D an increase in primary income for Kenya

1 marks

Answer: A

This question in 9708/11 Oct/Nov 2023

Q221 · A country’s current account deficit is larger this year than last 9708/12 Oct/Nov 2023

25 A country’s current account deficit is larger this year than last. What is the most likely reason for this increase? A Demand for domestically produced goods has risen. B Domestic inflation has risen faster than the inflation of its major trading partners. C Domestic unemployment has risen. D The exchange rate has depreciated.

1 marks

Answer: B

This question in 9708/12 Oct/Nov 2023

Q222 · A foreign government pays a UK university to educate its students 9708/12 Oct/Nov 2023

28 A foreign government pays a UK university to educate its students. How would this be recorded on the balance of payments current account of the UK? current account money flows component A secondary income inflow B secondary income outflow C trade in services inflow D trade in services outflow

1 marks

Answer: C

This question in 9708/12 Oct/Nov 2023

Q223 · An economy in equilibrium has a trade deficit of $20bn and a budget surplus of $20bn 9708/13 Oct/Nov 2023

18 An economy in equilibrium has a trade deficit of $20bn and a budget surplus of $20bn. Investment spending is $50bn. What is the total saving? A $5bn B $10bn C $15bn D $20bn

1 marks

Answer: B

This question in 9708/13 Oct/Nov 2023

Q224 · Which components are included as primary income in the current account of the balance of… 9708/13 Oct/Nov 2023

21 Which components are included as primary income in the current account of the balance of payments? trade current employment in goods transfers income from abroad “ Y v v key ° Y x x / = included c x v x X = not included D x x y

1 marks

Answer: D

This question in 9708/13 Oct/Nov 2023

Q225 · What is the most likely cause of a current account deficit on the balance of payments? 9708/13 Oct/Nov 2023

25 What is the most likely cause of a current account deficit on the balance of payments? A an undervalued exchange rate B a relatively low rate of inflation C a shrinking domestic economy D a general fall in national productivity

1 marks

Answer: D

This question in 9708/13 Oct/Nov 2023

Q226 · According to the circular flow of income, what would be the immediate result of an… 9708/12 Feb/March 2024

17 According to the circular flow of income, what would be the immediate result of an increase in the value of a country’s exports? A imports would increase B national income would increase C savings would increase D taxes would increase

1 marks

Answer: B

This question in 9708/12 Feb/March 2024

Q227 · The table shows an extract from a country’s balance of payments 9708/12 Feb/March 2024

27 The table shows an extract from a country’s balance of payments. exports imports $ billion $ billion trade in goods 150 200 trade in services 70 50 primary (investment) income 120 100 secondary (transfer) income 15 20 What is the current account balance? A –$10bn B –$15bn C –$30bn D –$50bn

1 marks

Answer: B

This question in 9708/12 Feb/March 2024

Q228 · The table shows the goods balance and services balance for a country in selected years 9708/12 Feb/March 2024

28 The table shows the goods balance and services balance for a country in selected years. goods balance services balance year $ billion $ billion 2015 +120 –30 2016 +110 –30 2017 +50 –10 2018 +130 –60 2019 +140 –50 Between which years did the overall goods and services balance change the most? A 2015–2016 B 2016–2017 C 2017–2018 D 2018–2019

1 marks

Answer: B

This question in 9708/12 Feb/March 2024

Q229 · What is not a likely cause of a deficit in the current account of the balance of payments? 9708/12 Feb/March 2024

30 What is not a likely cause of a deficit in the current account of the balance of payments? A Consumer spending is low. B Primary incomes in the form of investment income are low. C The rate of exchange is high. D Wage costs of production are high.

1 marks

Answer: A

This question in 9708/12 Feb/March 2024

Q230 · The terms of trade for a country increased from 100 to 120 9708/11 May/June 2024

27 The terms of trade for a country increased from 100 to 120. Which statements are correct? 1 The terms of trade have deteriorated. 2 Fewer exports are needed to buy the same quantity of imports. 3 The balance of payments must improve. A 1 and 2 B 1 only C 2 and 3 D 2 only

1 marks

Answer: D

This question in 9708/11 May/June 2024

Q231 · The table shows the current account of a balance of payments for January 2021 9708/11 May/June 2024

29 The table shows the current account of a balance of payments for January 2021. $m exports of goods 15 000 imports of goods 17 000 services credit 2 500 debit 2 000 primary income credit 100 debit 1 000 secondary income balance 60 What is the current account balance? A a deficit of $2340m B a deficit of $2000m C a surplus of $2340m D a surplus of $2000m

1 marks

Answer: A

This question in 9708/11 May/June 2024

Q232 · A major European economy announced that the primary income account deficit of its balance… 9708/12 May/June 2024

26 A major European economy announced that the primary income account deficit of its balance of payments changed from $20 billion to $50 billion. What would have contributed to this change? A an increase in the value of imported medical supplies B an increase in investment dividends paid to foreigners C a reduction in the value of exported manufactured goods D a reduction in the expenditure by visiting tourists

1 marks

Answer: B

This question in 9708/12 May/June 2024

Q233 · What is not included in the current account of the balance of payments? 9708/12 May/June 2024

30 What is not included in the current account of the balance of payments? A international aid B trade in goods C trade in services D foreign direct investment

1 marks

Answer: D

This question in 9708/12 May/June 2024

Q234 · What is an export of services in Jamaica’s current account? 9708/13 May/June 2024

26 What is an export of services in Jamaica’s current account? A an inflow of funds to Jamaica to buy shares B earnings from US tourists visiting Jamaica C earnings of Haitian workers in Jamaica sent to Haiti D the export of Jamaican coffee

1 marks

Answer: B

This question in 9708/13 May/June 2024

Q235 · The table shows the trade in goods and services for an economy between 2019 and 2021 9708/11 Oct/Nov 2024

24 The table shows the trade in goods and services for an economy between 2019 and 2021. trade in goods year and services ($ millions) 2019 –1000 2020 –3000 2021 –4000 What would have most likely caused the change from 2019 to 2021? A increasing domestic unemployment B increasing domestic rate of income tax C increasing domestic inflation D increasing import tariffs

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2024

Q236 · Which transaction is not recorded in the current account? 9708/11 Oct/Nov 2024

28 Which transaction is not recorded in the current account? A aid received from the government of another country B exports of raw materials C investments by a foreign company D payments of dividends to an overseas investor

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2024

Q237 · In which situation will a country’s terms of trade improve? 9708/11 Oct/Nov 2024

30 In which situation will a country’s terms of trade improve? A Its imports rise in value less than its exports. B Its imports rise in volume less than its exports. C The price of its imports rises by less than the prices of its exports. D The value of its external payments rises by less than the value of its external receipts.

1 marks

Answer: C

This question in 9708/11 Oct/Nov 2024

Q238 · A country has a floating exchange rate 9708/12 Oct/Nov 2024

25 A country has a floating exchange rate. Its current account on the balance of payments moves from a surplus to a deficit. Which rate is likely to increase in the short run as a consequence of this worsening of its current account? A economic growth rate B exchange rate C interest rate D unemployment rate

1 marks

Answer: D

This question in 9708/12 Oct/Nov 2024

Q239 · The table shows the average price of exports and imports 9708/12 Oct/Nov 2024

27 The table shows the average price of exports and imports. Which combination of changes in export prices and import prices could result in a country’s terms of trade increasing from 100 to 110? the average price the average price of exports of imports A falls by 5% rises by 5% B remains unchanged rises by 10% C rises by 5% falls by 5% D rises by 10% remains unchanged

1 marks

Answer: D

This question in 9708/12 Oct/Nov 2024

Q240 · Turkey imported $220 million worth of goods and services 9708/12 Oct/Nov 2024

29 Turkey imported $220 million worth of goods and services. Turkey exported $12 million worth of goods and services during the same period. Its net income was –$15 million. What is Turkey’s current account balance? A –$223 million B –$217 million C +$208 million D +$247 million

1 marks

Answer: A

This question in 9708/12 Oct/Nov 2024

Q241 · What is not a valid explanation of why a government might allow a deficit on the balance… 9708/13 Oct/Nov 2024

25 What is not a valid explanation of why a government might allow a deficit on the balance of payments current account to continue? A The balance of payments account must always balance. B Foreign direct investment might help to finance the deficit. C The country may have a larger surplus on the other parts of its balance of payments account. D The standard of living is increased if the level of cheap food imports is significant.

1 marks

Answer: A

This question in 9708/13 Oct/Nov 2024

Q242 · What is most likely to cause a current account deficit? 9708/13 Oct/Nov 2024

27 What is most likely to cause a current account deficit? A a recession in the domestic economy B a relatively high rate of inflation C an undervalued exchange rate D high labour productivity

1 marks

Answer: B

This question in 9708/13 Oct/Nov 2024

Q243 · High economic growth is often accompanied by a worsening of the current account of the… 9708/12 Feb/March 2025

20 High economic growth is often accompanied by a worsening of the current account of the balance of payments. Which reason for this trend is not valid? A Economic growth raises domestic consumption, leaving very little to sell to overseas consumers. B Economic growth raises domestic output, leading to lower prices and more price-competitive goods both at home and abroad. C Economic growth raises incomes and leads to rising demand for foreign goods. D Economic growth results in rising requirements of inputs from other countries.

1 marks

Answer: B

This question in 9708/12 Feb/March 2025

Q244 · A country experiences a rising trade deficit and a current account surplus at the same… 9708/12 Feb/March 2025

28 A country experiences a rising trade deficit and a current account surplus at the same time. Which combination of events might explain this? Event 1 Event 2 A a global recession resulting in Gross National Income (GNI) decreased prices of commodities rises faster than Gross Domestic Product (GDP) B increased subsidies for exporters increased donations received from abroad to combat a humanitarian crisis C removal of restrictions on imports removal of restrictions on the remittance of profits of foreign-owned producers D rising imports of machinery to increased secondary income from help raise exports in the future workers’ remittances from abroad

1 marks

Answer: D

This question in 9708/12 Feb/March 2025

Q245 · Why does the value of a country’s terms of trade have no monetary units? 9708/11 May/June 2025

26 Why does the value of a country’s terms of trade have no monetary units? A It cannot be calculated accurately enough. B It includes more than one currency. C It is a ratio of two index numbers. D It measures change over time.

1 marks

Answer: C

This question in 9708/11 May/June 2025

Q246 · Primary income and secondary income are components of the current account of the balance… 9708/11 May/June 2025

29 Primary income and secondary income are components of the current account of the balance of payments. Which option correctly identifies an example of primary income and secondary income? primary income secondary income A government transfers income from profits earned abroad B income from profits earned abroad dividends earned on foreign shares C income from profits earned abroad government transfers D workers’ remittances income from profits earned abroad

1 marks

Answer: C

This question in 9708/11 May/June 2025

Q247 · What is most likely to lead to a persistent surplus in a country’s current account of its… 9708/12 May/June 2025

27 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

1 marks

Answer: B

This question in 9708/12 May/June 2025

Q248 · What is the most likely consequence of economic growth? 9708/13 May/June 2025

20 What is the most likely consequence of economic growth? A a fall in the price of raw materials B a rise in youth unemployment C a worsening current account balance D reduced demand-pull inflationary pressures

1 marks

Answer: C

This question in 9708/13 May/June 2025

Q249 · A country has a deficit on the current account of the balance of payments 9708/13 May/June 2025

27 A country has a deficit on the current account of the balance of payments. What would be expected to increase the deficit? A an appreciation of the exchange rate B an increase in domestic productivity C an introduction of import quotas D a rise in subsidies to domestic firms

1 marks

Answer: A

This question in 9708/13 May/June 2025

Q250 · The table gives the terms of trade index for a country over three years 9708/13 May/June 2025

29 The table gives the terms of trade index for a country over three years. year 1 year 2 year 3 terms of trade 100 105 112 What is the most likely impact of this change? A there will be a decrease in cost-push inflation B there will be a decrease in living standards C there will be an increase in the budget surplus D there will be an increase in the volume of exports

1 marks

Answer: A

This question in 9708/13 May/June 2025

Q251 · The aggregate demand (AD) curve in an economy shifts to the left 9708/11 Oct/Nov 2025

20 The aggregate demand (AD) curve in an economy shifts to the left. What is most likely to cause this shift? A a decrease in the exchange rate B a decrease in the interest rate C an increase in the budget deficit D an increase in the current account deficit

1 marks

Answer: D

This question in 9708/11 Oct/Nov 2025

Q252 · What would not be included in the current account of the balance of payments? 9708/11 Oct/Nov 2025

29 What would not be included in the current account of the balance of payments? A income earned outside the country that is transferred into the country B value of food and raw materials produced and consumed within the country C value of food and raw materials that are exported D value of telecommunications services that are imported

1 marks

Answer: B

This question in 9708/11 Oct/Nov 2025

Q253 · A country with a floating exchange rate has a large deficit on the current account of the… 9708/12 Oct/Nov 2025

26 A country with a floating exchange rate has a large deficit on the current account of the balance of payments. What is most likely to decrease as a consequence of this deficit? A competitiveness of the country’s products B level of employment in the country C prices of exports from the country D rate of inflation in the country

1 marks

Answer: C

This question in 9708/12 Oct/Nov 2025

Q254 · What is the effect of a cut in a country‘s income tax rates on its exports and imports? 9708/12 Oct/Nov 2025

29 What is the effect of a cut in a country‘s income tax rates on its exports and imports? exports imports A fall fall B fall unchanged C unchanged fall D unchanged rise

1 marks

Answer: D

This question in 9708/12 Oct/Nov 2025

Q255 · A government is planning to increase its expenditure on defence 9708/13 Oct/Nov 2025

19 A government is planning to increase its expenditure on defence. Half of this expenditure will be on equipment such as planes and weapons which it will have to import as it does not produce this equipment domestically. What is the initial impact on injections and leakages from the circular flow of income? A The initial rise in injections is greater than the initial rise in leakages. B The initial rise in injections is greater than the initial fall in leakages. C The initial rise in injections is smaller than the initial rise in leakages. D The initial rise in injections is smaller than the initial fall in leakages.

1 marks

Answer: A

This question in 9708/13 Oct/Nov 2025

Q256 · What is an example of primary income in the current account of the balance of payments of… 9708/13 Oct/Nov 2025

27 What is an example of primary income in the current account of the balance of payments of Pakistan? A dividends received by a Pakistani resident from shares in a domestic firm B profits of Pakistani businesses exporting goods C rent received by a Pakistani resident from a property in another country D salary received by a Pakistani engineer from a foreign-owned producer operating in Pakistan

1 marks

Answer: C

This question in 9708/13 Oct/Nov 2025

Q257 · The main export of country X is oil 9708/13 Oct/Nov 2025

30 The main export of country X is oil. The world demand for oil is price inelastic. The world supply of oil is reduced by the major oil producing countries, including country X. Imports into country X are unchanged. What are the effects of this action by the major oil producing countries on the terms of trade and the current account of the balance of payments in country X? terms of trade current account A increases increases B increases decreases C decreases increases D decreases decreases

1 marks

Answer: A

This question in 9708/13 Oct/Nov 2025