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DISCUSS THE ALTERNATIVE POLICIES A GOVERNMENT MAY USE TO IMPROVE ADEFICIT IN THE BALANCE OF PAYMENT

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Introduction

DISCUSS THE ALTERNATIVE POLICIES A GOVERNMENT MAY USE TO IMPROVE ADEFICIT IN THE BALANCE OF PAYMENT The deficit in the balance of payment means import bigger than export in the record of transaction in one economy to the rest of the world. The deficits mainly occur through various reasons such as: structural problem, exchange rate position, excess economic demand etc. hence the alternative policies could adopted to reduce this problem. First of all, the structural problem which indicate the products non-competitive, low quality or high price, and this problem will lead reduce in export, and effect the deficit in the balance of payment. In order to tackle this problem the supply side polices has been used, such as reaching and develop the new technologies etc. ...read more.

Middle

However, there are still some problems exist, such as inflation goes up, because the price of import goods are goes up, which will influence the economic growth, and the consumer loss, the consumer can not afford the high price of imports, then they have to choose other cheaper one domestic goods etc. in the other hand, it will be increase in the consumption of domestic goods. Which lead the economics growth. Thirdly, the excess demand that mans the economics growth of domestic is bigger than the international economics growth. For this situation, the import will greater than export, because the domestic production need more resources rather than other countries. In order to solve this problem, we can use both fiscal and monetary policy, impose an tax on the income will directly reduce the demand in the market. ...read more.

Conclusion

Lastly, impose tariff. Tariff is a kind of indirect tax which imposes on the import in order to increase the price of imports, and which may affect the less demand on imports. Which has the same problem as the low exchange rate. The imports become more expensive, the consumer loss their purchasing power to satisfy their wants. And the inflation goes up. Also the other country may impose tariff on other countries' exports. Where the trade will lead the comparative to other rest of countries, increase efficiency in the world may be achieved. Therefore the impose tariffs on the imports may impact those advantage, the benefits lose. To conclude, all sorts of policies can be used to reduce the deficit in the balance of payment. But they all have limited disadvantage. Use them all together may achieve the best effect. ...read more.

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Response to the question

This essay has potential, as it covers the main points regarding a budget deficit. There is a discussion of the disadvantages of various policies, however there needs to be more evaluation. In my opinion, I would be evaluating what factors ...

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Response to the question

This essay has potential, as it covers the main points regarding a budget deficit. There is a discussion of the disadvantages of various policies, however there needs to be more evaluation. In my opinion, I would be evaluating what factors make the policies effective, using phrases such as "it depends upon" to clarify that all situations are not the same. A note of warning, however, is that examiners cannot award evaluation marks without sufficient analysis. This is evident here, as the essay does not fully explain how the policies will reduce the current account deficit. More analysis will ensure the perceptive evaluative comments seen here at times will not be discredited.

Level of analysis

The analysis here is basic. Starting with the definition of a Balance of Payments deficit - this is wrong. They've described a current account deficit, and it is key that you are able to distinguish between the two. As a result, this essay focuses heavily on imports and exports, whereas it could also look at investment and speculation (looking at the inflation rate and stability of government). The paragraph detailing how a depreciation of the currency would work is okay, but I'd just like a bit more numerical analysis. Something as simple as saying £1:$2 goes to £1.00:$1.50 will mean British exports are less expensive (and a few accompanying calculations). The essay does well to pick up on structural problems, such as inefficient markets or poor quality products, but this paragraph doesn't get to the crux of the solution. It is essential to be clear in economics, and it's not obvious here that the essay is explaining how investment in education, technology, etc (a supply side policy) will improve this. I have a query with the conclusion. It is no good at A-Level to simply say "all policies together will be the best way forward" as this shows a complete lack of understanding. You should be weaving a justified judgement based on your evaluation, looking at what policy will be most effective for different situations.

Quality of writing

The essay has a solid structure, with a clear introduction and conclusion. The quality of writing, however, is poor. The grammar is awkward and syntax is often wrong. Sentences such as "Lastly, impose tariff" only detract from what may be good analysis. Without a sophisticated style, examiners will be reluctant to give the top marks regardless of the content. For example "Secondly, the exchange rate position is directly affect the export and import." shows knowledge of the exchange rate and its significance, but the wording gives the impression that they don't understand fully.


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