A-LevelEconomicsExchange Rates / Balance of PaymentsOct/Nov 2021Paper 1 Q261 Mark
Which condition is necessary for a country’s balance of payments on its current account to improve if it reduced its exchange rate?
ABoth the price elasticities of supply for its imports and its exports must be elastic.
BThe importing country will buy all the excess supplies of its trading partner to clear the market.
CThe sum of the price elasticities of domestic demand for imports and the foreign demand for exports must be greater than one.
DThe trading partners need to agree on the maximum prices to be charged for imports and exports.
✓ Correct Answer
The correct answer is C. This question tests the candidate's understanding of exchange rates / balance of payments within the Economicssyllabus. The examiner's mark scheme requires...
📋 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...
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