11.1 Policies to correct disequilibrium in the balance of payments

The use of tariffs is the most effective way to correct a balance of payments deficit.'

With the help of a diagram, evaluate this statement. [20]

A country with an open economy has falling demand for exports. Consider the view that monetary policy alone will solve this problem. [20]

With the help of a diagram, evaluate the effectiveness of the use of expenditure-switching policies to reduce a current account deficit on the balance of payments. [20]

Expenditure reducing policies will reduce a balance of payments deficit but will also cause significant unemployment.

Evaluate this statement [20] [Sample answer]

To what extent do you agree that it is not possible to achieve economic growth without simultaneously causing a balance of payments deficit? [13]