An economy is experiencing high demand-pull inflation alongside a persistent structural current account deficit on its balance of payments. Which one of the following policy combinations is most likely to help resolve both macroeconomic problems simultaneously?
A depreciation of the exchange rate and a reduction in national insurance contribution rates.
An increase in interest rates and a reduction in import tariffs.
An increase in government spending on infrastructure and an appreciation of the exchange rate.
An increase in personal income tax rates and government-funded retraining programs to improve productivity.
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.