A-LevelEconomicsInternational economic issues9708/12 · May/June 2010 · Q261 Mark

When is a deficit on the current account of the balance of payments likely to worsen?

Awhen the government adopts a deflationary macroeconomic policy

Bwhen the government devalues the currency

Cwhen the prices of imported products that are demand-inelastic increase significantly

Dwhen tariffs are placed on imported products that are demand-elastic

✓ Correct answer

C: when the prices of imported products that are demand-inelastic increase significantly

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Topic: International economic issues, A-Level Economics (syllabus 9708). Multiple choice, 1 mark.
Source: A-Level Economics, May/June 2010 Paper 1 Variant 2, question 26.

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