CAMBRIDGE INTERNATIONAL AS & A LEVEL ECONOMICS: TEACHER’S RESOURCE

29 Policies to correct
imbalances in the
current account of the
balance of payments
Teaching plan
Topic Approximate Learning content Resources
number of
learning
hours
29.1  Policies to 5 hours Why is the stability of Coursebook
correct imbalances the current account Economics in context
in the current a government policy Activities 29.1–29.3
account of the objective? Think like an economist
balance of payments Exam-style questions multiple
How do various policies
choice 1–10
affect the current
account? Workbook
Key skills exercises 1–10
Practice questions data response 1–3,
essay 1, 2
Language worksheet 29.1

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 CAMBRIDGE INTERNATIONAL AS & A LEVEL ECONOMICS: TEACHER’S RESOURCE

BACKGROUND KNOWLEDGE

•• This chapter considers the effects of various policies on the current account. The current account
was studied in detail in Chapter 28.

•• Since this chapter includes references to fiscal, monetary, supply side policies and protectionism,
learners should be encouraged to look over the key points from Chapters 22, 23, 24 and 26

LANGUAGE SUPPORT

•• The key to Topic 29.1 is for learners to explain how different macroeconomic policies effect the
current account.

•• To that end, you should encourage learners to revise their understanding of the different
policies studied in previous chapters and to practise their analytical writing.

•• For example, if a learner was to consider fiscal policy they might say: ‘a deficit fiscal budget
tends to expand aggregate demand. This in turn encourages spending on imports that can
increase a deficit on the current account’. This is a chain of analysis.

•• Language worksheet 29.1 has been designed to help learners build these chains of analysis and
then remember them.

•• The use of flash cards has been shown to increase memory through testing. By using
revision cards here, learners may choose to use them more regularly as part of an AS Level
revision programme.

Common misconceptions
Misconception How to elicit How to overcome

Some learners may Ask learners whether
complain that real world it is true that the use
data and experience of imports tariffs will
may conflict with always lead to an
economic theory. improvement on the
current account.
You should explain that economic theory seeks
to create simple models to explain very complex
real-world behaviours. It cannot, however,
predict the outcome to every possible scenario.
Try to motivate learners by explaining that
the interesting challenge for economists is to
investigate why their models sometimes fail.

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 CAMBRIDGE INTERNATIONAL AS & A LEVEL ECONOMICS: TEACHER’S RESOURCE

29.1 Policies to correct imbalances in the current

account of the balance of payments
LEARNING PLAN

Syllabus learning objectives Learning intentions Success criteria

6.5.1 government policy • Explain the government • Understand that governments

objective of stability of the
current account
6.5.2 effect of fiscal, monetary,
supply-side and protectionist
policies on the current account
policy objective of stability of usually aim to ensure export
the current account. revenue equals import
expenditure in the long run;
• Analyse the effect of fiscal,
in the short run a current
monetary, supply-side and
account surplus may benefit
protectionist policies on the
an economy.
current account.
• Explain how fiscal policy tools
may be used to reduce a
current account deficit on the
balance of payments.
• Explain how monetary policy
tools may be used to reduce
a current account surplus.
• Explain how supply-side
policy tools may be used
to reduce a current account
deficit.
• Explain how protectionist
policy tools may be used
to reduce a current account
deficit.

Starter idea
It’s all about the customer (15 minutes)
Resources: Economics in context in Chapter 29 of the Coursebook
Description and purpose: The purpose of this activity is to introduce the main themes of Chapter 29. You can
introduce learners to the Economics in context feature about China. Before learners answer the questions in
pairs, you could ask whether the current account surplus is all about the consumer. If you look at Japan, you can
see the same pattern: USA and UK consumers spend much more and buy more imports. Is it possible for policy
to have an impact on consumers? You could quote the most recent current account deficit by USA and China.
What to do next: Complete the exercise and ask learners to present their answers to the questions in the
Economics in context feature.

Main teaching ideas

1 What should our government do? (90 minutes)
Learning outcome: Explain the government policy objective of stability of the current account, analyse the
effect of fiscal, monetary, supply-side and protectionist policies on the current account.
Resources: Coursebook Activity 29.2
Description and purpose: The purpose of this activity is for learners to decide whether the country is
currently in a deficit or a surplus in their current account on the balance of payments. They then need to

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 CAMBRIDGE INTERNATIONAL AS & A LEVEL ECONOMICS: TEACHER’S RESOURCE

examine the policy tools that the government could use (such as: fiscal, monetary, protectionism and supply
side policies) and decide what the government should do next. For help they can refer to Coursebook
sections 29.1 to 29.5.
Learners can then construct a presentation in PowerPoint and present it to the class. As they need to explain
the thinking behind each of the policies, they will need to spend about five to ten minutes presenting.

Answers:
Learners’ own answers.

Differentiation ideas:
• Support: You can summarise the economic position of your country. You can point to suitable articles
or resources. You can also ask questions to draw out answers where a learner lacks confidence.
• Challenge: Better answers will identify groups that are affected by a policy and learners should be
encouraged to go into greater depth with their explanations. For instance, an increase in the interest
rates will benefit savers. Are there many savers in their country? Would the savers save more? If the
savers are elderly, has their income increased? Might spending then increase for the elderly?
Assessment ideas: For formal assessment, you can have a copy of the slides with the notes that learners use
to make the presentation. This can be graded for analysis as there is a lot of reasoning in this activity.
2 Create some revision cards (90 minutes)
Learning outcome: Explain the government policy objective of stability of the current account, analyse the
effect of fiscal, monetary, supply-side and protectionist policies on the current account.
Resources: Language worksheet 29.1
Description and purpose: Language worksheet 29.1 asks learners to read through the Coursebook chapter
and make summary notes in the table on the worksheet. This will improve their understanding of the
different macro-economic policies, e.g. fiscal policy and the impact that they have on a current account
for an economy. Encourage learners to go through the supporting chapters as well, as there are good case
studies that can be used as examples of the different policies, e.g. the dairy farm in Norway.
Learners could work in pairs and you could conduct a question and answer session to ensure all learners
have the correct answers. When complete, learners should construct flash cards.
To revise, they use the Leitner system. Each flash card is revised until they get it right. The flash card is then
put in another box and revised less frequently. Please see the worksheet for more details.

Answers:
See worksheet answers.

Differentiation ideas:
• Support: This activity may identify areas where learners do not understand a topic. If this is true for
the whole group, then perhaps you need to go through the topic on the board. If this is only true for
one or two pairs then you can intervene in a small group.
• Challenge: European countries went through a period of austerity. What was this policy? What effect
did it have on the economies and did it have any effect on the current account of the balance of
payments? Compare the UK and Germany.
Assessment ideas: Following the revision, learners can do the practice exam questions at the end of
the chapter (maybe as a test). They could also complete Coursebook Activity 29.3 in which they create
multiple-choice questions.

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 CAMBRIDGE INTERNATIONAL AS & A LEVEL ECONOMICS: TEACHER’S RESOURCE

Plenary idea
What next? (20 minutes)
Resources: None
Description and purpose: You can make these points clear to learners:
• This is the last chapter of AS Level.
• They have started a revision process.
• They have other topics and other practice exam questions (29 chapters).
• There are also past papers that are available on the Cambridge Assessment International
Education website.
Learners could then be asked to spend time creating a plan that involves:
• making sure their understanding is good – creating the table
• summarising table into flash cards
• going through the flash cards using the Leitner system
• testing themselves using practice exam questions and past papers.
In the same research paper that cited flash cards as remarkably effective, the authors also stated that the other
amazingly effective technique was to plan revision.
Assessment ideas: Learners may find it motivating to create a progress chart that they can colour in or tick off
as they work through their revision. You can provide regular test opportunities for multiple-choice questions,
data response and long answer questions within class as part of the plan.

Downloadable resources
Language worksheet
29.1 Revision
This worksheet asks learners to create flash cards and use the Leitner system to revise this topic. Learners can
also use this system for other topics. The worksheet asks learners to work through this topic as part of
the process.

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