Observation

This question was the least attempted in the paper. Candidates were expected to define invisible imports, distinguish between devaluation and depreciation of currency and to outline three factors that can make devaluation of currency effective. Only few of the candidates that attempted this question were able to define invisible imports as most of them defined it as anything than cannot be seen or touched rather than services rendered by a country to others and failed to adequately distinguish between devaluation and depreciation of a currency. They also could not expatiate their points in the (c) part of the question, hence they were unable to score high marks.
The candidates were expected to answer thus:
(a)        Invisible imports are imports of services such as banking, shipping, insurance e.t.c.

(b)        Devaluation of currency is the official reduction in the value of a country’s currency against other currencies.                                                                  
This is done under a fixed exchange rate system.                                         
Depreciation of currency on the other hand is the fall in the value of a country’s currency as a result of market forces of demand and supply.                       
This occurs where the country operates a floating exchange rate system.                 

(c)        (i)         Elasticity of demand for import- if the demand for imports is elastic, trade volume will fall because of the increase in the price of imports.
(ii)        Elasticity of demand for export- if the demand for export is elastic, trade volume will increase.
(iii)       Elasticity of supply of export- if the supply of export is elastic, trade volume will increase.
(iv)       Elasticity of supply of imports – if the supply of imports is inelastic, trade volume will decrease.
(v)        Rise in the price of imports must not be able to cause domestic inflation.
(vi)       Retaliatory measures by other countries that can result in devaluation of their currencies and will negate the effects of devaluation must not be taken.
(vii)      Industrial sector of the country must be efficient enough to meet local demand for goods and meet the international requirement for export.