A LevelEconomicsAQAExam QuestionsThe National & International Economy14. The International Economy

The International Economy (AQA A Level Economics): Exam Questions

Exam code: 7136

5 hours37 questions

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14. The International Economy

1
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Figure 8 shows two supply (S1 and S2) curves and the demand (D) curve for euros on the foreign exchange market and the price of euros in terms of pounds sterling.

q29-paper-3-june-2020-aqa-a-level-economics

Which one of the following is the most likely explanation for the change in the exchange rate shown in Figure 8? An increase in eurozone

  • companies buying factories in the UK.

  • exports of manufactured goods to the UK.

  • interest rates relative to those in the UK.

  • productivity growth relative to that in the UK.

Choose your answer

2
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A large Asian steel-producing country dumps its surplus steel on the world market. All other things being equal, if the demand for steel is price elastic, the most likely consequence for the EU market for steel will be to

  • reduce excess capacity in the EU steel-making industry.

  • reduce the value of steel imports into the EU.

  • shift the demand curve for EU steel workers to the left.

  • shift the supply curve of EU steel workers to the left.

Choose your answer

3
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A country experiences a large net capital outflow. All other things being equal, the most box likely consequence of this in the short run will be a decrease in

  • its exchange rate.

  • its net income from overseas investments.

  • its rate of interest.

  • the value of exports and imports.

Choose your answer

4
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The diagram below shows the market demand curve (D), the market supply curve (S) for solar panels produced in a country, and the world market supply curve (SW) for solar panels.

q15-june-2018-aqa-a-level-economics

To protect domestic producers of solar panels the country introduces a tariff on imports. The imposition of the tariff increases the price of solar panels from the world market price (PW) to the higher price (PT). Following the imposition of the tariff, the amount of tariff revenue collected by the government is shown by the area

  • EFGH

  • JFGK

  • PWPTGK

  • Q2FGQ3

Choose your answer

5
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The table below shows the average exchange rate and currency valuation estimates for four nations in comparison to the US Dollar in January 2016.

 

Average exchange rate to US $1

Currency valuation estimate

Australian Dollar

1.46 

Undervalued by 24%

Brazilian Real

4.05

Undervalued by 32%

Chinese Yuan 

6.57

Undervalued by 46%

Danish Krone

 6.84

Undervalued by 12%

Which one of the following can be concluded from the data?

  • The Australian Dollar has appreciated by 24% against the US Dollar.

  • The Brazilian Real has been devalued by 32% against the US Dollar.

  • The Chinese Yuan has depreciated the most against the US Dollar.

  • The Danish Krone has the closest purchasing power parity to the US Dollar.

Choose your answer

6
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The table below shows selected components of the UK balance of payments on current account as a percentage of GDP between 2011 and 2014.

Year

Balance of trade in goods and services

Primary income balance

Secondary income balance

Current account balance

2011

-1.6

1.3

-1.3

-1.6

2012

-2.0

0.1

-1.3

-3.2

2013

-2.0

-1.0

-1.5

-4.5

2014

-1.9

-1.8

-1.4

-5.1

It can be concluded from the data that between 2011 and 2014 the main reason for the rise in the current account deficit as a percentage of GDP was

  • GDP growing faster than the deficit on the current account.

  • the deficit on trade in goods increasing by more than the surplus on trade in services.

  • the deterioration in the primary income balance.

  • the growth in the deficit on the secondary income balance.

Choose your answer

7
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Globalisation can make some product markets more contestable. Which one of the following characteristics of globalisation is the most likely explanation for such an increase in contestability?

  • A reduction in protectionism

  • Greater synchronisation of economic cycles between countries

  • Higher levels of labour migration

  • The growth of employment in emerging market economies

Choose your answer

8
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The table below shows how much of each of two products can be produced by two countries with the same amount of resources.

 

Motorbikes

 

Cars

Brazil

10

or

5

United States

6

or

2

Which one of the following statements is correct?

  • Brazil has a comparative advantage in the production of both motorbikes and cars.

  • Brazil has a comparative advantage in the production of cars.

  • The opportunity cost of producing motorbikes is higher in the United States than Brazil.

  • Trade will not take place because Brazil is better at producing both goods.

Choose your answer

91 mark

Which one of the following is an expenditure switching policy that would help to reduce a deficit on the balance of payments on current account?

An increase in

  • government expenditure on public goods.

  • income tax to reduce consumer expenditure.

  • quotas on exports of demerit goods.

  • tariffs to raise the price of imports.

Choose your answer

101 mark

Which one of the following would be classified as a debit item in the secondary income section of the current account of the UK balance of payments?

  • Dividends paid to overseas owners of shares in UK companies

  • Emergency aid provided to another country following a natural disaster

  • Investment in building a factory abroad by a UK firm

  • Premiums paid by UK based organisations to foreign insurance companies

Choose your answer

111 mark

Table 3 below shows the amount of coffee or tea that two countries can produce with a given amount of resources.

Table 3

Coffee (tonnes)

Tea (tonnes)

Country X

80 000

100 000

Country Y

50 000

75 000

Which one of the following statements is supported by the data in Table 3?

  • Country X has a comparative advantage in the production of both coffee and tea

  • Country X has a comparative advantage in the production of coffee and has an absolute advantage in the production of tea

  • The opportunity cost of producing both coffee and tea is higher in Country X than in Country Y

  • The opportunity cost of producing tea in Country X is lower than the opportunity cost of producing tea in Country Y

Choose your answer

121 mark

Table 4 shows the value of the pound sterling in euros and Canadian dollars at the beginning of 2021 and 2022.

Table 4

2021

2022

Value of £1 in euros

1.11

1.19

Value of £1 in Canadian dollars

1.76

1.71

According to the data in Table 4, between the beginning of 2021 and the beginning of 2022, the Canadian dollar

  • strengthened against the pound sterling and strengthened against the euro.

  • strengthened against the pound sterling and weakened against the euro.

  • weakened against the pound sterling and strengthened against the euro.

  • weakened against the pound sterling and weakened against the euro.

Choose your answer

131 mark

When using data to make international comparisons of the standard of living, purchasing power parity (PPP) exchange rates are more useful than market exchange rates.

This is because PPP exchange rates take into account differences in countries’

  • distribution of income.

  • levels of taxation.

  • price levels.

  • rates of population growth.

Choose your answer

141 mark

Which one of the following is a role of the World Trade Organisation?

  • Helping countries settle disputes over tariffs and quotas

  • Lending money to countries with balance of payments problems

  • Monitoring the stability of the international monetary system

  • Providing loans at low rates of interest to low-income countries

Choose your answer

151 mark

Table 2 shows the UK's balance of trade in goods and services in successive quarters.

Table 2

Quarter

2020 Q4

2021 Q1

2021 Q2

2021 Q3

2021 Q4

2022 Q1

2022 Q2

Balance of trade (£bn)

–8.5

3.6

0.9

–12.1

–4.7

–25.3

–25.0

What was the UK's median quarterly balance of trade over the period shown in Table 2?

  • –£12.1bn

  • –£10.2bn

  • –£8.5bn

  • £11.4bn

Choose your answer

161 mark

A country joins a customs union. Which one of the following is the most likely consequence of its membership?

  • Exports to non-member countries will increase

  • Exports to other member countries will be more expensive

  • Imports from non-member countries will be cheaper

  • Imports from other member countries will increase

Choose your answer

171 mark

Which one of the following helps to explain why, in a freely floating exchange rate system, market forces are likely to automatically reduce a deficit or surplus on a country's balance of trade?

  • A deficit will lead to excess demand for the country's currency and a depreciating exchange rate.

  • A deficit will lead to excess supply of the country's currency and an appreciating exchange rate.

  • A surplus will lead to excess demand for the country's currency and an appreciating exchange rate.

  • A surplus will lead to excess supply of the country's currency and a depreciating exchange rate.

Choose your answer

181 mark

Table 8 shows an index of copper exports for a country during the years 2020 to 2023.

Table 8

Year

Index of copper exports (2020 = 100)

2020

100.0

2021

106.0

2022

112.1

2023

118.0

Which one of the following statements is correct?

  • Between 2020 and 2023, the mean annual rate of growth in the country's exports of copper was 6%

  • In 2022, the country's exports of copper grew by 6.1%

  • The highest rate of growth in the country's exports of copper was in 2023

  • The rate of growth in the country's exports of copper was higher in 2021 than in 2022

Choose your answer

191 mark

Which one of the following might be part of a market-based strategy for promoting economic growth and development in a less-developed economy?

  • Adopting a fixed exchange rate

  • Encouraging overseas aid

  • Privatising key industries

  • Subsidising exports

Choose your answer