This question appeared in Unit 4 — The national and international economy — within the AQA specification, and raises important issues concerning the current account of the balance of payments. The balance of payments is one of the key macroeconomic variables that allow us to monitor the progress of the economy. For an open economy such as the UK, it is important to be aware of what is meant by the balance of payments, and why it is of significance to the performance of the economy. It is also important to understand the factors that can influence this key indicator.
(a) Explain the main economic determinants of a country’s demand for imports. (15 marks)
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