Economics (AS & A Level) · May / June 2022 · Paper 11 · Question 30

The government of a country is worried about a large deficit on the current account of its balance of payments and an increasing rate of inflation. The country has a fixed exchange rate for its currency. Which policy measure is most likely to help the government to reduce the current account deficit and lower the rate of inflation?

1. Adevaluation of the currency
2. Bincreasing government spending
3. Cdecreasing the direct taxes
4. Dincreasing the interest rate

As printed in the paper