What this practice covers
These questions are drawn from past IB Economics papers and filtered to balance of payments. You answer, you find out immediately whether you were right, and you get the reasoning for the correct option and for each distractor. Wrong answers go to a mistakes locker so you can come back to exactly those.
Practice is free. You need an account only so your progress and your mistakes are still there next time.
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What examiners see students get wrong here
These are the errors that cost marks on balance of payments, taken from our own topic notes. Read them before you practise and you will recognise the traps in the questions.
- Confusing the balance of trade (goods and services only) with the whole current account.
- Forgetting that the accounts must sum to zero, so a current account deficit is financed by a financial account surplus.
- Treating any deficit as automatically harmful without asking what is causing it and how it is financed.
- Assuming a surplus is automatically desirable.
- Placing FDI in the current account. Investment flows go in the financial account; the income they later generate goes in primary income.
- Asserting depreciation will fix a deficit without invoking Marshall–Lerner or the J-curve.
- Stating Marshall–Lerner without explaining that it is about volumes outweighing prices.
- Ignoring the inflationary cost of depreciation.
Revise it first
If any of the above is unfamiliar, work through the notes before practising: Balance of Payments revision notes.