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Methods of correction - short answer

question

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.