IGCSE Economics Paper-2: Specimen Questions with Answers 11 - 12 of 100

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Passage

Indonesia booked a trade surplus of US $ 1.27 billion in June as both exports and imports rose from the slump recorded in May, signaling increasing economic activity as the country and its trading partners have begun to lift coronavirus-induced restrictions.

Exports were up 2.28 percent year-on-year (yoy) in June at $ 12.03 billion, the first growth recorded in four months, thanks to rising shipments of manufactured and agricultural goods, Statistics Indonesia (BPS)

Question 11 (1 of 5 Based on Passage)

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Short Answer▾

What does slump indicate?

Explanation

Slump is a term used for a sharp decline in business activity of a country, of a country’s trade or market value. To describe both a short or sharp decline as well as a gradual prolonged period marked by low activity or value, the term slump is used. Slumps can be economic slumps, industry slumps, earnings slumps etc. In terms of economics slump usually means to the beginning of a decline phase During slump recession is not officially announced until continuous months of declining activity have been seen in the economy, so the mountains that leads up to the declaration of recession are simply described as a prolonged economic slump.

Question 12 (2 of 5 Based on Passage)

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What is the effect of trade surplus?

Explanation

Employment and economic growth may be generated through trade surplus but it also leads to a rise in prices and interest rates in the economy.

  • A country՚s currency value is also influenced by trade balance in the global markets; it allows a country to control much of its currency through trade.
  • A country՚s currency is strengthened through trade surplus in comparison to other countries which affects the currency exchange rates however; it depends on the proportion of goods and services of a country as compared to other countries and other market factors as well.
  • A trade surplus means high demand of country՚s good in the foreign market when its focus is on the trade effects, which causes the price of goods to rise and leads to strengthening of the domestic currency.

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