An economy is experiencing a persistent current account deficit on its balance of payments. All other things being equal, which of the following is most likely to lead to a reduction in this deficit?
A depreciation of the domestic currency when the sum of the price elasticities of demand for exports and imports is less than 111
An increase in the domestic government's budget deficit whilst private sector saving and investment remain unchanged
An increase in the domestic marginal propensity to save combined with a fall in private sector investment
An increase in domestic manufacturing productivity that is offset by a proportional appreciation of the exchange rate
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.