Economics (AS & A Level) · Feb / March 2022 · Paper 32 · Question 28

In year 1, countries X and Y are each in balance of payments equilibrium. In year 2, country X, an exporter of oil, raises the price of its oil, which increases its foreign earnings by $500m, half of which is deposited with banks in country Y. Country Y is an important buyer of X's oil and the price rise increases its foreign expenditure by $400m. Other things remaining equal, what are the total currency flows for X and Y?

1. A+150 –150
2. B+150 –400
3. C+250 –150
4. D+250 –400

As printed in the paper