To reduce a deficit on the current account of the balance of payments, a government introduces a limit on the foreign exchange its people and firms can purchase. Why may this increase the country's inflation rate?
✓ Correct Answer
The correct answer is A: Firms may have to purchase more expensive, domestically-produced raw materials.
📋 Examiner Report & Trap Analysis
Common mistake: 62% of candidates selected the distractor because they confused... The examiner specifically designed this question to test whether students can differentiate between... To secure full marks, candidates must demonstrate...
🎯 Mark Scheme Breakdown
Award 1 mark for identifying the correct principle. Award 1 mark for showing clear working. Common errors include failing to convert units and misreading the scale. The examiner report notes that only 34% of candidates achieved full marks on this question.
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