6.

4 Current account of balance of payments

1. Identify an item that would have appeared in Nigeria’s trade in services. (1) TB

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2. Define primary income. (2) TB

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3. Explain how a country could have a deficit on its primary income but a current account surplus.
(4) TB

4. Explain how a country with more imports of goods than exports of goods can still record a
surplus on the current account of its balance of payments. [4]

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5. Explain two reasons why millions of tourists visit Mauritius each year. [4]

6. Analyse why China buys most of its cherries from Chile. [4]

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7. Discuss whether or not outward investment might benefit a Mauritian firm. [6]

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8. Discuss whether or not the Haitian economy would benefit from fewer of its people working in
Chile. [6]

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9. Analyse how a rise in a country’s inflation rate could move a current account surplus into a
current account deficit. (6) TB

10. Explain two reasons, other than methods of protection, why a country’s exports may fall. [4]

11. Analyse how a cut in spending on training and education could increase a deficit on the current
account of the balance of payments. (6) TB

12. Analyse how a rise in consumer spending can cause a current account deficit. (5) TB

13. Discuss whether or not a country with a high economic growth rate will have a deficit on the
current account of its balance of payments. [8]

14. Discuss whether or not a reduction in a country’s trade protection will reduce its current
account surplus. [8]

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15. Explain two reasons why the value of a country’s exports may be greater than the value of its
imports. [4]

16. Analyse how an increase in labour mobility could improve the performance of a country’s trade
in goods. [4]

17. Analyse whether large coal-producing countries are likely to be net exporters of coal. [5]

18. Analyse how a country’s current account deficit might be reduced if its firms become
internationally competitive. [6]

19. Analyse how advances in technology may improve the current account balance on a country’s
balance of payments. [6]

20. Analyse how an increase in labour productivity in a country can increase a surplus on the
current account of its balance of payments. [6]

21. Discuss whether or not an increase in government subsidies will reduce a deficit on the current
account of the balance of payments. [8]

22. Discuss whether or not a subsidy, given to farmers by the Nigerian government, would reduce
the deficit on the current account of its balance of payments. [6]

23. Analyse how a fall in a country’s foreign exchange rate could reduce a deficit on the current
account of its balance of payments. [6]

24. Discuss whether or not a depreciation in its foreign exchange rate will reduce a country’s
deficit on the current account of the balance of payments. (8) TB

25. Discuss whether or not an increase in foreign MNCs will reduce a deficit on the current account
of the balance of payments of a host country. [8]

26. Discuss whether or not more MNCs setting up branches in India would be likely to reduce
India’s current account deficit. (6) TB

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27. Discuss whether or not an increase in a current account surplus will benefit an economy. (8) TB

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28. Discuss whether or not a current account deficit on its balance of payments harms an economy.
[8]

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