This question was also popular among the candidates. Candidates were expected to           explain export promotion, depreciation of currency, terms of trade, balance of trade and currency appreciation in the (a), (b), (c), (d), and (e) parts of the question respectively. Most of the candidates that attempted this question were able to explain export promotion in the (a) part, but were unable to correctly elucidate the following concepts: depreciation of currency, terms of trade, balance of trade and currency appreciation as expected in the (b), (c), (d), and (e) parts of the question respectively, hence their performance in this question was below average.

The candidates were expected to answer thus:

(a)        Export promotion is any policy by which government encourages producers of export goods and other goods, to produce and export more to earn more foreign exchange.

(b)        Depreciation of currency refers to the fall in the value of a country’s currency against other currencies as a result of the interplay of the forces of demand and supply. This is aimed at making exports cheaper while imports will be made very expensive.                                                                                                                        
(c)        Terms of trade refers to the rate at which a country’s exports are exchanged for her imports. If a unit of a country’s exports exchange for more units of her imports, terms of trade is said to be favourable and vice versa.               OR
Terms of trade =      Index of export prices ×100
                                             Index of import prices 1         
A country’s terms of trade is said to improve when this ratio increases and worsens  when it decreases.                                                                                           

(d)       Balance of trade refers to the difference between total value of visible goods sold and
total value of visible goods bought by a country during a given period, usually a year. A favourable balance of trade means that a country is exporting more merchandise goods in monetary terms than it is importing while unfavourable balance of trade means that a country is importing more merchandise goods in monetary terms than it is exporting.                              

(e)        Currency appreciation is when the value of a nation’s currency improves vis-à-vis other currencies of the world through the inter-play of the forces of demand and supply. This  will make exports more expensive while imports will be cheaper.