Exam-style question (10/3/2020)
The questions are taken from page 78 in your revision guide.
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Explain the causes of a fall in a country’s exchange rate (8 marks).
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Discuss whether a fall in a country’s exchange rate will reduce a deficit on the current account of the balance of payments of the country (12 marks).
Figure 1. 8-mark question
Figure 2. 12-mark question
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Explain the effects of an appreciation of its currency on an economy’s inflation rate (8 marks).
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Discuss whether a rise in an economy’s inflation rate will cause the value of its currency to fall (12 marks).
Figure 3. 8-mark question
Figure 4. 12-mark question
+------------------------+ +-------------------------------+ | | | | | Argument: | | Counterbalance argument: | | {d} |<-----+ +--->| {d} | +------------------------+ | | +-------------------------------+ | | | | | | /------------------------\ | | | Key term | | | \------------------------/ | | | v +------------------------+ | | | Evaluation | | {d} | +------------------------+
The following chart represents the essay from the revision guide (page 176).
+------------------------+ +-------------------------------+ | | | | | | | | | {d} |<-----+ +--->| {d} | | | | | | | | market economy | | | | planned economy | | | | | | | | market forces | | | | distribution of income | | resource allocation | | | | state planning | | price mechanism | | | | merit/demerit goods | | scarce resources | | | | | | more expensive | | | | | | | | | | | | advantages of price | | | | advantages of planned | | mechanism (...) | | | | economy (...) | | downsides of price | | | | downsides of planned | | mechanism (...) | | | | economy (...) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | +------------------------+ | | +-------------------------------+ | | | | | | | | | | | | | | /------------------------\ | | | the economic problem | | | \------------------------/ | | | v +------------------------+ | | | Evaluation | | {d} | +------------------------+