Lesson M2.5.1

M2.5.1 Components of the current account and balances Quiz: OCR Economics, Unit 7

20 questions

Written by Revision Ninja · Last reviewed 11 October 2026

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Lesson M2.5.1, Components of the current account and balances: 20 multiple choice questions for the OCR Economics (H460), Unit 7: Economic policy objectives, written with Revision Ninja.

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The 20 questions

  1. Which component of the UK current account includes trade in physical manufactured products?

    • Secondary income
    • Trade in services
    • Trade in goods
    • Primary income

  2. What term describes the combined net total of trade in goods and trade in services?

    • Capital account balance
    • Current account balance
    • Balance of trade
    • Financial account balance

  3. Investment income, such as dividends earned from overseas assets, falls under which current account component?

    • Trade in services
    • Capital account
    • Primary income
    • Secondary income

  4. Government transfers such as foreign aid and international organisation contributions are classified under which section?

    • Primary income
    • Secondary income
    • Capital account
    • Trade in services

  5. If UK exports of goods equal £100bn and imports equal £140bn, what is the goods balance?

    • £40bn surplus
    • £240bn deficit
    • £240bn surplus
    • £40bn deficit

  6. A UK resident receives dividend payments from shares owned in a foreign company. How is this recorded?

    • Trade in services
    • Primary income debit
    • Primary income credit
    • Secondary income credit

  7. What condition exists on the current account when foreign money inflows are smaller than total outflows?

    • Current account deficit
    • Financial account deficit
    • Capital account surplus
    • Current account surplus

  8. The UK government sends foreign economic aid to a developing country. How is this transaction recorded?

    • Secondary income credit
    • Primary income debit
    • Trade in services
    • Secondary income debit

  9. A foreign tourist pays for accommodation and meals while visiting London. How is this spending recorded?

    • Trade in goods
    • Secondary income debit
    • Trade in services
    • Primary income credit

  10. Which macroeconomic policy uses tariffs or exchange rate changes to redirect expenditure away from foreign imports?

    • Expenditure-switching
    • Supply-side expansion
    • Contractionary fiscal
    • Expenditure-reducing

  11. A government raises taxes to lower domestic economic growth and reduce total import consumption. What policy is this?

    • Monetary easing
    • Protectionist policy
    • Expenditure-reducing
    • Expenditure-switching

  12. If a currency appreciates, making exports more expensive and imports cheaper, how does the current account react?

    • Surplus widens
    • Balance improves
    • Deficit widens
    • No change occurs

  13. In terms of national savings S and investment I, what equals net exports in a simple model?

    • S plus I
    • I minus S
    • S minus I
    • S divided by I

  14. What term describes total trade in services, primary income flows, and secondary income flows combined?

    • Invisible balance
    • Visible balance
    • Capital balance
    • Financial balance

  15. How must a nation finance a persistent deficit on its current account within the balance of payments?

    • Capital account deficit
    • Financial account surplus
    • Primary income deficit
    • Current account surplus

  16. If domestic inflation stays higher than trading partners, what happens to export price competitiveness over time?

    • Exports increase
    • Competitiveness falls
    • Competitiveness rises
    • Imports decrease

  17. A temporary UK worker abroad sends employee compensation back to their home household. What is this?

    • Financial account debit
    • Secondary income credit
    • Primary income credit
    • Trade in services

  18. What economic concept explains why a currency devaluation might worsen the trade deficit before improving it?

    • J-curve effect
    • Laffer curve effect
    • Marshall-Lerner condition
    • Keynesian multiplier

  19. For a currency devaluation to successfully improve the trade balance, what condition must total demand elasticity meet?

    • Be below zero
    • Equal zero
    • Exceed one
    • Equal one

  20. What term describes international payments made without receiving any direct goods or services in return?

    • Factor income flows
    • Unilateral transfers
    • Bilateral trade
    • Investment returns

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