A-LevelEconomicsInternational economic issues9708/12 · Oct/Nov 2021 · 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

C: The sum of the price elasticities of domestic demand for imports and the foreign demand for exports must be greater than one.

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Topic: International economic issues, A-Level Economics (syllabus 9708). Multiple choice, 1 mark.
Source: A-Level Economics, Oct/Nov 2021 Paper 1 Variant 2, question 26.

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