Policies to correct disequilibrium in the balance of payments
11.1What the syllabus asks of you
- components of the balance of payments accounts: current account, financial account and capital account
- effect of fiscal, monetary, supply-side, protectionist and exchange rate policies on the balance of payments
- difference between expenditure-switching and expenditure-reducing policies
Drill this topic
Every question on Policies to correct disequilibrium in the balance of payments, untimed, marked as you go.
Make a worksheet
Choose the years and how many questions, then print it with the answers on separate pages.
16 questions
1May / June 2025 · Paper 34 · Q26Show mark scheme →
Aprice elasticity of demand for imports 0.2; price elasticity of demand for exports 0.2; marginal propensity to import 0.1
Bprice elasticity of demand for imports 0.2; price elasticity of demand for exports 0.2; marginal propensity to import 0.4
Cprice elasticity of demand for imports 0.6; price elasticity of demand for exports 0.2; marginal propensity to import 0.1
Dprice elasticity of demand for imports 0.6; price elasticity of demand for exports 0.6; marginal propensity to import 0.4
Mark scheme
2Oct / Nov 2024 · Paper 31 · Q25Show mark scheme →
Aa decrease in government spending
Ba decrease in the exchange rate of the country's currency
Can increase in domestic income taxes
Dan increase in domestic interest rates
Mark scheme
3Oct / Nov 2024 · Paper 31 · Q26Show mark scheme →
Aforeign direct investment ✓, interest, profits and dividends ✗
Bforeign direct investment ✗, interest, profits and dividends ✗
Cforeign direct investment ✓, interest, profits and dividends ✓
Dforeign direct investment ✗, interest, profits and dividends ✓
Mark scheme
4Oct / Nov 2024 · Paper 32 · Q25Show mark scheme →
Aexpenditure-reducing
Bexpenditure-switching
Cexpansionary monetary
Dcontractionary monetary
Mark scheme
5Oct / Nov 2024 · Paper 33 · Q26Show mark scheme →
Aa devaluation of the currency
Ba subsidy on domestic production
Ca tariff on imports
Dan increase in income taxes
Mark scheme
6May / June 2024 · Paper 31 · Q25Show mark scheme →
Aa decrease in government spending
Ba depreciation of the exchange rate
Can increase in direct taxes
Dan increase in interest rates
Mark scheme
7May / June 2024 · Paper 32 · Q26Show mark scheme →
Aan expenditure-reducing policy
Ban expenditure-switching policy
Cthe law of comparative advantage
Dthe Marshall–Lerner condition
Mark scheme
8May / June 2024 · Paper 33 · Q25Show mark scheme →
Aa decrease in government spending
Ba depreciation of the exchange rate
Can increase in direct taxes
Dan increase in interest rates
Mark scheme
9Feb / March 2023 · Paper 32 · Q29Show mark scheme →
Aan increase in income tax rates
Ban increase in interest rates
Can increase in tariff rates
Dan increase in the supply of money
Mark scheme
10Oct / Nov 2022 · Paper 12 · Q28Show mark scheme →
Aincreasing import quotas
Bincreasing income tax allowances
Cincreasing spending on unemployment benefits
Dincreasing subsidies to domestic firms
Mark scheme
11May / June 2022 · Paper 11 · Q30Show mark scheme →
Adevaluation of the currency
Bincreasing government spending
Cdecreasing the direct taxes
Dincreasing the interest rate
Mark scheme
12May / June 2022 · Paper 13 · Q28Show mark scheme →
Aa reduction in interest rates
Ba revaluation of the currency
Can increase in direct taxes
Dan introduction of foreign exchange controls
Mark scheme
13May / June 2022 · Paper 14 · Q28Show mark scheme →
Aa depreciation of the currency and an increase in government spending
Ban appreciation of the currency and a cut in interest rates
Can increase in the money supply and a pay freeze
Dincreases in both direct and indirect taxation
Mark scheme
14Feb / March 2022 · Paper 12 · Q28Show mark scheme →
Aa deflationary policy
Ba policy of direct controls
Can expenditure-reducing policy
Dan expenditure-switching policy
Mark scheme
15May / June 2021 · Paper 11 · Q19Show mark scheme →
AAn Indian steel manufacturer buys insurance for its factories from a firm in Europe.
BAn Indian steel manufacturer employs foreign workers in its Indian factories.
CAn Indian steel manufacturer receives profits from its factories in Europe.
DAn Indian steel manufacturer supplies investment for a new factory in Europe.
Mark scheme
16May / June 2021 · Paper 12 · Q29Show mark scheme →
Adepreciation of the currency
Bincreased direct taxation
Ctax incentives for exporters
Dthe imposition of protectionist tariffs
Mark scheme