Economics (AS & A Level) · Oct / Nov 2025 · Paper 13 · Question 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?

1. Aterms of trade increases; current account increases
2. Bterms of trade increases; current account decreases
3. Cterms of trade decreases; current account increases
4. Dterms of trade decreases; current account decreases

As printed in the paper