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The International Economy

The International Economy. Higher Economics Past Paper Questions Topic 1. The International Economy: Outcome 1. Reasons for international specialisation and exchange. 2012: QB5a – 8 marks. Describe the theories of Absolute and Comparative Advantage. 2009: QB6a – 7 marks.

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The International Economy

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  1. The International Economy Higher Economics Past Paper Questions Topic 1

  2. The International Economy: Outcome 1 Reasons for international specialisation and exchange

  3. 2012: QB5a – 8 marks • Describe the theories of Absolute and Comparative Advantage.

  4. 2009: QB6a – 7 marks Cadbury has expanded production in Poland and has axed 700 manufacturing jobs in certain areas of the UK. These areas will experience a negative multiplier effect. • Explain why some UK firms might choose to expand production abroad rather than in the UK

  5. 2009: QB4b – 8 marks Despite the UK’s reluctance to join the Eurozone, a 2006 report stated that “Britain remained the favourite European destination for foreign investment projects”. • Explain why foreign firms might wish to locate in the UK.

  6. 2009: QB4b – 8 marks Despite the UK’s reluctance to join the Eurozone, a 2006 report stated that “Britain remained the favourite European destination for foreign investment projects”. • Explain the advantages and disadvantages for the UK economy of foreign direct investment.

  7. 2007: QA1f – 2 marks • Give one example of a good or service that can be produced more cheaply in India or China than in the UK and explain why it can be produced more cheaply there.

  8. 2007: QB1b – 8 marks • Explain the theories of absolute and comparative advantage.

  9. The International Economy: Outcome 1 FORMS, REASONS AND EFFECTS OF PROTECTION

  10. 2013: Qb5a – 5 marks • Describe the main economic benefits of free trade.

  11. 2013: Qb5a – 8 marks • Explain why some countries decide to impose restrictions on free trade.

  12. 2012: QA1f(i) – 2 marks • Draw a diagram to show how guaranteed minimum prices to cotton farmers in the USA can lead to the over production of cotton.

  13. 2012: QA1f(ii) – 4 marks • Suggest 2 trade barriers that can be used to reduce imports and explain how they would work.

  14. 2010: QB6a – 15 marks One argument used for imposing import controls on Chinese goods is that average production costs in the UK are higher than average production costs in China. • Describe some arguments for imposing import controls, other than cost differences. • Describe some arguments against imposing import controls.

  15. 2007: Qb1c – 12 marks • Argue the case for and against import controls.

  16. SQP: Qb6a – 8 marks Most economists would agree that free trade can benefit an economy. • Explain what is meant by free trade and describe some of the benefits it may bring to an economy.

  17. SQP: Qb6b(i) – 7 marks Most economists would agree that free trade can benefit an economy. • Suggest reasons why some countries may wish to restrict free trade.

  18. SQP: Qb6b(ii) – 6 marks Most economists would agree that free trade can benefit an economy. • Other than tariffs, explain some measures countries could use to restrict trade.

  19. The International Economy: Outcome 1 BALANCE OF PAYMENTS

  20. 2013: QB6B • Explain the reasons why the UK has a large “trade in goods deficit”. (5 marks) • Describe the components of the balance of payments accounts other than trade in goods. (6 marks)

  21. 2012: QB3c(ii) – 4 marks • Describe how a rise in the UK rate of inflation is likely to affect the Current Account of its Balance of Payments.

  22. 2011: QA1c • Explain what is meant by a “deficit on Trade in Goods”. (2 marks) • Explain one reason for the UK’s Trade in Goods being in deficit. (2 marks) • Explain one reason for the UK’s Trade in Services being in surplus. (2 marks)

  23. 2010: QA2h – 3 marks • Explain how a slowdown in the eurozone is likely to affect the UK Balance of Payments.

  24. 2009: QA1e – 4 marks • Explain how an increase in the price of timber is likely to affect: • The UK balance of trade • The exchange rate of sterling

  25. 2009: QA2f – 3 marks • Explain how an increase in the value of the yuan against the dollar is likely to affect the US balance of trade.

  26. 2009: QB5a – 9 marks In the second quarter of 2007, Scottish manufactured exports grew at their fastest rate for 5 years. • Describe the main components of the Balance of Payments, other than trade in goods.

  27. 2008: QB3a – 8 marks The slow down in the growth of UK National Income in 2005 was partly caused by the increased deficit on trade in goods and services. • Suggest and explain reasons why the UK usually has a deficit on trade in goods and services.

  28. 2008: QB3a – 8 marks The slow down in the growth of UK National Income in 2005 was partly caused by the increased deficit on trade in goods and services. • Explain, using a circular flow of income diagram, how a deficit on trade in goods and services can slow down the growth of National Income.

  29. 2008: QB3a – 9 marks The slow down in the growth of UK National Income in 2005 was partly caused by the increased deficit on trade in goods and services. • Suggest and explain measures the government could take to reduce deficits on trade in goods and services in the future.

  30. 2009: QB5a – 9 marks In the second quarter of 2007, Scottish manufactured exports grew at their fastest rate for 5 years. • Describe the main components of the Balance of Payments, other than trade in goods.

  31. 2007: QA1c(i) – 2 marks • Suggest and explain one reason for Britain’s large trade deficit.

  32. 2007: QA1c(iI) – 3 marks • Other than import controls, describe one measure Britain could take to reduce a trade deficit, and explain how it would work.

  33. SQP: QA2e – 3 marks • Suggest and explain one reason for the large deficits in the UK Current Account.

  34. The International Economy: Outcome 1 EXCHANGE RATE SYSTEMS:EXCHANGE RATES AND POLICIES

  35. 2013: QA1a(ii) – 2 marks • Explain the term “floating exchange rate system”.

  36. 2013: QA1b • Explain why a weak pound should encourage an increase in UK exports. (2 marks) • Apart from an increase in exports, describe the effects of a weak pound on the UK economy. (4 marks)

  37. 2013: QA1c – 3 marks • Explain why low interest rates in the UK economy might lead to a depreciation in the value of sterling.

  38. 2013: QA1f • Name one type of exchange rate system other than a floating system. (1 mark) • Describe one advantage and one disadvantage of the system you mentioned above. (4 marks)

  39. 2012: QA1d – 2 marks • Explain how the price of China’s imports of raw materials would be affected if the exchange rate of China’s currency were to rise.

  40. 2012: QB4b – 8 marks • Describe the factors which may cause the exchange rate of sterling to fall.

  41. 2012: QB4c – 7 marks • Describe the likely effects on the UK economy of a fall in the exchange rate of sterling.

  42. 2011: QA1e – 4 marks • Explain why a fall in the value of sterling: • Boosts exports • Puts upward pressure on the rate of inflation

  43. 2011: QB6d – 10 marks • Discuss the advantages and disadvantages of a floating exchange rate.

  44. 2010: QA2e – 4 marks • Explain one advantage and one disadvantage for the UK economy of a fall in the exchange rate of sterling.

  45. 2009: QA1e – 4 marks • Explain how an increase in the price of timber is likely to affect: • The UK balance of trade • The exchange rate of sterling Also in Balance of Payments

  46. 2008: QA1e – 2 marks • Explain the effect a rise in the price of oil might have on the foreign exchange value of sterling.

  47. 2008: QA2b(ii) – 3 marks • Explain how an increase in interest rates is likely to affect the exchange rate of sterling.

  48. 2007: QB4a – 8 marks The UK has decided not to join the Eurozone, and will continue to allow Sterling to float. One reason for this is that joining the Eurozone would result in a large fall in the UK rate of interest. • Explain factors that determine the demand for Sterling on the foreign exchange markets.

  49. 2007: QB4B – 10 marks The UK has decided not to join the Eurozone, and will continue to allow Sterling to float. One reason for this is that joining the Eurozone would result in a large fall in the UK rate of interest. • Discuss the advantages and disadvantages for a country of having a floating exchange rate.

  50. SQP: QA2f – 3 marks • Explain how the change in interest rates from 2003 to 2004 could have caused the change in exchange rates in those years.

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