Methods of correction - short answer
Question 1
Explain two ways the government might attempt to reduce a deficit on the current account of the balance of payments.
Question 2
To what extent could the government afford to ignore a deficit on the current account of the balance of payments?
Question 3
Under a floating exchange rate system, a depreciation of the currency would normally be expected to eliminate a deficit on the current account of the balance of payments. Explain why this might not always happen.
Question 4
Explain how, in theory, a floating exchange rate system automatically corrects a balance of payments deficit without the need for government intervention.
Question 5
Evaluate how successful, in practice, a freely floating exchange rate system is likely to be in correcting a balance of payments deficit.
Question 6
Analyse how government policies aimed at reducing a balance of payments deficit might conflict with other goals of economic policy.