An economy is experiencing a persistent current account deficit on its balance of payments. All other things being equal, which of the following policy combinations is most likely to reduce this current account deficit?
An increase in the central bank's base interest rate and a depreciation of the domestic currency.
A reduction in the standard rate of income tax and an appreciation of the domestic currency.
An expansion of government infrastructure spending and a reduction in import tariffs.
A reduction in cash reserve requirements for commercial banks and a revaluation of the domestic currency.
310 exam-style questions on AQA A Level Economics 2.6 The international economy (A-level only), covering 2.6.1 Globalisation, 2.6.2 Trade, 2.6.3 The balance of payments, 2.6.4 Exchange rate systems, and 2.6.5 Economic growth and development. Each one has a worked solution and a mark scheme showing where the marks go.