Lesson 4.2.6.3

4.2.6.3 The balance of payments Quiz: AQA Economics, Unit 2

20 questions

Written by Revision Ninja · Last reviewed 11 October 2026

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Lesson 4.2.6.3, The balance of payments: 20 multiple choice questions for the AQA Economics (7136), Unit 2: The national and international economy, written with Revision Ninja.

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The 20 questions

  1. Which account on the balance of payments records trade in goods and services?

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

  2. Which account on the balance of payments records capital transfers and non-produced assets?

    • Financial account
    • Capital account
    • Current account
    • Visible account

  3. Which account on the balance of payments records foreign direct investment flows?

    • Current account
    • Financial account
    • Trade account
    • Capital account

  4. What occurs on the current account when import spending exceeds export revenue?

    • Capital account surplus
    • Current account surplus
    • Current account deficit
    • Financial account deficit

  5. What occurs on the current account when export earnings exceed import spending?

    • Current account deficit
    • Capital account deficit
    • Current account surplus
    • Financial account surplus

  6. What type of foreign investment involves purchasing long-term assets with management control?

    • Short-term investment
    • Direct investment
    • Portfolio investment
    • Speculative investment

  7. What type of foreign investment involves purchasing shares or bonds without management control?

    • Capital investment
    • Direct investment
    • Physical investment
    • Portfolio investment

  8. Exports are £200bn, imports £230bn, net primary income £10bn, net secondary income -£5bn. What is the balance?

    • -£35 billion
    • -£25 billion
    • -£15 billion
    • +£25 billion

  9. Which condition states that depreciation improves the current account if PED exports plus PED imports exceeds 1?

    • Prebisch-Singer hypothesis
    • J-curve effect
    • Laffer curve
    • Marshall-Lerner condition

  10. Which policy is an example of an expenditure-reducing measure to lower import demand?

    • Higher interest rates
    • Import tariffs
    • Currency devaluation
    • Import quotas

  11. Which type of policy aims to redirect consumer spending away from imports towards domestic goods?

    • Supply-side
    • Expenditure-switching
    • Expenditure-reducing
    • Fiscal contraction

  12. What is a likely negative side effect of using contractionary fiscal policy to correct a current account deficit?

    • Higher inflation
    • Lower interest rates
    • Higher unemployment
    • Higher import spending

  13. How are trading partners most likely to respond when a country imposes tariffs to correct a trade deficit?

    • Increased import subsidies
    • A currency union
    • Retaliatory tariffs
    • Lower exchange rates

  14. What global issue is directly created by large, persistent current account surpluses in major economies?

    • Falling exchange rates
    • Global trade imbalances
    • Structural unemployment
    • Global hyperinflation

  15. How does an increase in domestic labour productivity usually affect a country's current account balance?

    • It worsens it
    • It creates inflation
    • No effect
    • It improves it

  16. On which section of the balance of payments are foreign direct investment inflows recorded?

    • Current account
    • Financial account
    • Capital account
    • Trade in services

  17. Which type of policy aims to alter relative prices to shift spending from imports to domestic goods?

    • Fiscal austerity
    • Expenditure-switching
    • Contractionary monetary
    • Expenditure-reducing

  18. How must a persistent current account deficit be financed in the long run?

    • Export subsidies
    • Higher tax revenues
    • Capital inflows
    • Currency appreciation

  19. Why can currency devaluation cause cost-push inflation in the short run?

    • Higher tax rates
    • Lower wage growth
    • Lower export demand
    • Higher import prices

  20. How do higher interest rates act as an expenditure-reducing policy to cut import demand?

    • By raising exports
    • By lowering inflation
    • By depreciating currency
    • By reducing consumption

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