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Balance of Payments · Paper 1 — Free Economics SL Practice Questions
1MasterySAQ-SCurrent account, capital account and financial account6 marksPaper 1~9 min
The following data refers to Japan's balance of payments in 2022.
In 2022, Japan recorded a current account surplus of USD 120 billion, primarily driven by exports of automobiles and machinery. The financial account showed a net outflow of USD 115 billion as Japanese firms invested heavily in overseas factories.
(a)
Using a fully labelled of the foreign exchange market for the Japanese yen, explain the effect of the current account surplus on the value of the yen. [3 marks]
(b)
Analyse why the financial account outflow might offset the upward pressure on the yen caused by the current account surplus. [3 marks]
Solutions
2MasterySAQ-SForeign direct investment and portfolio investment12 marksPaper 1~18 min
In 2023, the government of Vietnam introduced a package of policies targeting its electronics sector. The measures included: permitting foreign investors to own of the equity in domestic technology firms; removing restrictions on repatriating profits abroad; and offering a five-year corporate income tax holiday to foreign-owned factories in the electronics sector.
(a)
Define the term foreign direct investment (FDI). [2 marks]
(b)
Distinguish between foreign direct investment (FDI) and foreign portfolio investment (FPI). [2 marks]
(c)
Using a fully labelled , explain how Vietnam's 2023 policy package is likely to affect the inflow of FDI into its electronics sector. [4 marks]
(d)
Evaluate the likely impact of increased FDI inflows on Vietnam's macroeconomic performance in the long run. [4 marks]
Solutions
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