O-LevelEconomicsGovernment and the macroeconomy2281/11 · May/June 2014 · Q181 Mark
Governments aim to encourage stable prices because inflation can result in a current account deficit on the balance of payments. How does high inflation contribute to a current account deficit?
ACountries have to barter manufactured goods for raw materials.
BGoods manufactured for export lose their competitiveness.
CNumbers of foreign visitors increase.
DSpending on imported goods is reduced.
✓ Correct answer
B: Goods manufactured for export lose their competitiveness.
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