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WalesEconomicsQuick questions
Evaluating Economic Models and Policies (A2 Unit 4)
Quick questions on Balance of payments - WJEC A-Level Economics
3short Q&A pairs drawn directly from our worked dot-point answer. For full context and worked exam questions, read the parent dot-point page.
What is policies to correct a deficit?Show answer
Expenditure-reducing policy works because lower domestic demand reduces spending on imports, improving the current account, but at the cost of slower growth and higher unemployment. Expenditure-switching through a depreciation makes exports cheaper and imports dearer, improving the balance if the Marshall-Lerner condition holds (and subject to the J-curve); protection (tariffs, quotas) switches spending to domestic goods but risks retaliation and forgoes the gains from trade. Supply-side policy, raising productivity, skills and innovation to improve competitiveness, is the most sustainable solution because it lets exports grow with the economy, but it acts slowly. The exam reward is matching the policy to the cause and weighing the trade-offs.
What is q1?Show answer
Name the four components of the current account. [2 marks]
What is q2?Show answer
Explain one expenditure-switching policy to reduce a current account deficit. [3 marks]
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