Readers Question: Can you please discuss the nature of the current account deficit and the exchange rate in the UK along with the theory that would suggest there is a relationship between the exchange rate and the current account. A current account deficit implies the value of imports of (goods/services/investment incomes) is greater than the …
How can a change in the terms of trade affect the balance of payments ? How can a change in the balance of trade affect the terms of payments ? The terms of trade is the index of export prices divided by index of import prices (*100) The current account balance of payments is primarily …
Readers Question: what are the benefits and costs of a tariff on consumers, producers, employment levels and the government? The effect of tariffs on consumers Tariffs increase the cost of imports, leading to higher prices (P1 to P2) for consumers and a decline in consumer surplus. For example, UK consumers have lost out from EU …
Readers Question: Discuss the circumstances in which reducing the exchange rate and introducing quotas are effective policies to tackle a trade deficit. The trade deficit occurs when the value of imports is greater than the value of exports. This could reflect a lack of competitiveness or high levels of consumer spending on imports. The trade …
A devaluation leads to a decline in the value of a currency making exports more competitive and imports more expensive. Generally, a devaluation is likely to contribute to inflationary pressures because of higher import prices and rising demand for exports. However, the overall impact depends on the state of the economy and other factors affecting …
Some tips for writing economics essays Includes how to answer the question, including right diagrams and evaluation – primarily designed for A Level students. 1. Understand the question Make sure you understand the essential point of the question. If appropriate, you could try and rephrase the question into a simpler version. For example: Q. Examine the …