Lesson M2.5.2

M2.5.2 Imbalances and a sustainable balance of payments Quiz: OCR Economics, Unit 7

20 questions

Written by Revision Ninja · Last reviewed 11 October 2026

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Lesson M2.5.2, Imbalances and a sustainable balance of payments: 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 account of the balance of payments records trade in goods and services?

    • Capital account
    • Current account
    • Financial account
    • Reserve account

  2. What does the primary income section of the current account measure?

    • Portfolio asset purchases
    • Export sales revenues
    • Foreign aid transfers
    • Investment income flows

  3. What type of balance of payments policy aims to depress domestic aggregate demand?

    • Expenditure-reducing
    • Supply-side flexibility
    • Exchange rate manipulation
    • Expenditure-switching

  4. Which policy aims to encourage consumers to buy domestic goods instead of imports?

    • Monetary tightening
    • Contractionary fiscal policy
    • Expenditure-reducing
    • Expenditure-switching

  5. What must the sum of export and import price elasticities exceed for depreciation to work?

    • 1
    • 0
    • 0.5
    • 2

  6. What term describes workers sending money from abroad back to their origin country?

    • Portfolio flows
    • Remittances
    • Primary incomes
    • Direct foreign investment

  7. What economic term describes a balance of payments current account deficit that persists indefinitely?

    • Capital deficit
    • Financial surplus
    • Structural deficit
    • Cyclical deficit

  8. Which component of the balance of payments records foreign direct investment?

    • Primary income account
    • Current account
    • Financial account
    • Capital account

  9. A government increases national income tax rates to reduce import demand. What policy is this?

    • Commercial exchange policy
    • Protectionist supply policy
    • Expenditure-reducing policy
    • Expenditure-switching policy

  10. A country imposes tariffs on foreign steel to boost domestic steel sales. What policy is this?

    • Expenditure-switching policy
    • Expenditure-reducing policy
    • Fiscal tightening policy
    • Contractionary monetary policy

  11. If export PED is 0.4 and import PED is 0.7, currency depreciation will cause trade balance to:

    • Fluctuate randomly
    • Remain unchanged
    • Improve
    • Worsen

  12. If export elasticity is 0.2 and import elasticity is 0.5, currency depreciation will cause trade balance to:

    • Double immediately
    • Improve
    • Worsen
    • Stabilise instantly

  13. An initial deterioration of the trade balance following currency devaluation is known as the:

    • Phillips curve effect
    • Laffer curve effect
    • J-curve effect
    • Lorenz curve effect

  14. Why is a statistical discrepancy included in balance of payments accounts?

    • To balance to zero
    • To measure debt interest
    • To show capital transfers
    • To correct inflation

  15. A country experiences persistent large current account surpluses. What pressure might this create on its currency?

    • Appreciation pressure
    • No pressure
    • Depreciation pressure
    • Devaluation pressure

  16. A UK firm builds a new manufacturing plant in India. How is this recorded in UK BoP?

    • Capital account inflow
    • Financial account outflow
    • Current account outflow
    • Primary income inflow

  17. Why does the trade balance worsen immediately after an exchange rate devaluation?

    • Capital flows are fixed
    • Import demand is elastic
    • Export supply is infinite
    • Import demand is inelastic

  18. Financing a sustained current account deficit through short-term foreign portfolio investment primarily increases what risk?

    • Financial instability
    • Export growth
    • Hyperinflation
    • Structural unemployment

  19. If a nation runs a persistent current account surplus, it is consistently acting as a net:

    • Capital importer
    • Capital exporter
    • Borrower nation
    • Debtor country

  20. Which policy combination best addresses a deficit from high inflation and weak productivity?

    • Expansionary and protectionist
    • Supply-side and contractionary
    • Monetary expansion alone
    • Supply-side and expansionary

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