Correct Answer: A. goods and services reach the consumers

Correct Answer: B. devalue a country's currency

Explanation

One way to improve a deficit balance of payment is through devaluation. By devaluing the currency, the value of the home currency goes down against foreign currency. This means imports will become costlier as people will have to pay more for the local currencies to obtain a foreign currency that will be used to transact business. This invariably leads to a reduction in the demand for imports, which is one of the major causes of a deficit balance of trade/payment.

Explanation

Positive effects of inflation are:

(i) Reduction in the Quantity burden of debt. Debtors gain during inflation .

(ii) Higher prospects of profit lead to increase in resources and increased factors of production.

(iii) Higher tax yields if taxes are advalorem taxes.

(iv) Higher prices encourage higher output and possibly results in higher profits.

Negative effects of inflation are:

(i) Inflation discourages savings.

(ii) Encourages increases in interest rates.

(iii) Inflation redistributes income haphazardly. There is a fall in real income especially of those on fixed incomes e.g. pensioner.

(iv) Creditors lose during inflation.

(v) Balance of payments' problem since foreigners will want to sell to such countries and do minimal buying from such high cost producers.

(vi) Higher prices discourage exports since such countries will be high - cost producers

Correct Answer: A. role of supply and demand

Correct Answer: A. production cost is high

Explanation

Cost push inflation occurs when increase in cost of production are passed on to consumers in the form of high price for the goods and services on sale. The price of goods are pushed up by rising costs.

Correct Answer: C. The price mechanism allocates resources

Explanation

(a)(i) Devaluation is the official reduction of the exchange value of a national currency In terms of the currencies of other countries.

(ii) Deprecation of currency is the reduction of the exchange value of a national currency in relation to other currencies as a result of changes in demand and supply in the foreign exchange market.

(b)(i)Adoption of foreign exchange control measures.

(ii) Devaluation

(iii) Borrowing from foreign governments and International institutions.

(iv) Export promotion.

(v) Import substitution

(vi) Increased tariffs on imports

(vii) Embargoes.

(viii) Quotas.

(ix) Deflationary measures e.g. decreasing government

Correct Answer: C. poor implementation of policies

Correct Answer: C. low income group

Correct Answer: D. use scientific methods to explain observed phenomena