Suppose a country is experiencing a large and persistent surplus on the current account of its balance of payments. Which of the following policy combinations is least likely to assist in reducing this surplus?
A reduction in the rate of direct taxation combined with an appreciation of the domestic currency.
An increase in the central bank's base interest rate combined with an increase in government subsidies to export-oriented industries.
A decrease in the central bank's base interest rate combined with a reduction in import tariffs.
An appreciation of the domestic currency combined with a reduction in state-funded research and development (R&D) grants for exporters.
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.