Quelpr
1 markBalance of Payments and Exchange Rates

CSEC Economics · May/June 2017 · Paper 2 · Question 3(d)(i)

Caribville has a fixed exchange rate and is currently facing a serious balance of payments problem. Caribville usually exports a variety of goods and services. However, a hurricane destroyed a major export crop resulting in a significant reduction in net exports, leading to disequilibrium in its balance of payments.

State the name of the type of account in the balance of payments that shows the reduction in net exports.

The mark scheme is shown once you've answered.

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Other parts of this question

  1. 3(a)(i)Define the term 'Exchange rate devaluation'.[2 marks]
  2. 3(a)(ii)Define the term 'Floating exchange rate'.[2 marks]
  3. 3(b)List ONE protectionist measure used by countries to restrict trade.[1 mark]
  4. 3(c)Discuss TWO factors that can influence the level of the exchange rate in a country.[6 marks]
  5. 3(d)(ii)Explain how devaluation can correct the disequilibrium in Caribville's balance of payments.[3 marks]

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