The International Economy

The International Economy

The International EconomyHigher Economics

Past Paper QuestionsTopic 1Reasons for international specialisation and exchangeThe International Economy: Outcome 12012: QB5a 8 marksDescribe the theories of Absolute and Comparative Advantage.2009: QB6a 7 marksCadbury 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 UK2009: QB4b 8 marksDespite the UKs 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.2009: QB4b 8 marksDespite the UKs 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.2007: QA1f 2 marksGive 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.2007: QB1b 8 marksExplain the theories of absolute and comparative advantage.FORMS, REASONS AND EFFECTS OF PROTECTIONThe International Economy: Outcome 12013: Qb5a 5 marksDescribe the main economic benefits of free trade.2013: Qb5a 8 marksExplain why some countries decide to impose restrictions on free trade.2012: QA1f(i) 2 marksDraw a diagram to show how guaranteed minimum prices to cotton farmers in the USA can lead to the over production of cotton.2012: QA1f(ii) 4 marksSuggest 2 trade barriers that can be used to reduce imports and explain how they would work.2010: QB6a 15 marksOne 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.2007: Qb1c 12 marksArgue the case for and against import controls.SQP: Qb6a 8 marksMost 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.SQP: Qb6b(i) 7 marksMost economists would agree that free trade can benefit an economy.

Suggest reasons why some countries may wish to restrict free trade.SQP: Qb6b(ii) 6 marksMost economists would agree that free trade can benefit an economy.

Other than tariffs, explain some measures countries could use to restrict trade.BALANCE OF PAYMENTSThe International Economy: Outcome 12013: QB6BExplain 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)2012: QB3c(ii) 4 marksDescribe how a rise in the UK rate of inflation is likely to affect the Current Account of its Balance of Payments.2011: QA1cExplain what is meant by a deficit on Trade in Goods. (2 marks)

Explain one reason for the UKs Trade in Goods being in deficit. (2 marks)

Explain one reason for the UKs Trade in Services being in surplus. (2 marks)2010: QA2h 3 marksExplain how a slowdown in the eurozone is likely to affect the UK Balance of Payments.2009: QA1e 4 marksExplain how an increase in the price of timber is likely to affect:The UK balance of tradeThe exchange rate of sterling2009: QA2f 3 marksExplain how an increase in the value of the yuan against the dollar is likely to affect the US balance of trade.2009: QB5a 9 marksIn 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.2008: QB3a 8 marksThe 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.2008: QB3a 8 marksThe 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.2008: QB3a 9 marksThe 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.2009: QB5a 9 marksIn 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.2007: QA1c(i) 2 marksSuggest and explain one reason for Britains large trade deficit.2007: QA1c(iI) 3 marksOther than import controls, describe one measure Britain could take to reduce a trade deficit, and explain how it would work.SQP: QA2e 3 marksSuggest and explain one reason for the large deficits in the UK Current Account.EXCHANGE RATE SYSTEMS:EXCHANGE RATES AND POLICIESThe International Economy: Outcome 12013: QA1a(ii) 2 marksExplain the term floating exchange rate system.2013: QA1bExplain 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)2013: QA1c 3 marksExplain why low interest rates in the UK economy might lead to a depreciation in the value of sterling.2013: QA1fName 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)2012: QA1d 2 marksExplain how the price of Chinas imports of raw materials would be affected if the exchange rate of Chinas currency were to rise.2012: QB4b 8 marksDescribe the factors which may cause the exchange rate of sterling to fall.2012: QB4c 7 marksDescribe the likely effects on the UK economy of a fall in the exchange rate of sterling.2011: QA1e 4 marksExplain why a fall in the value of sterling:Boosts exportsPuts upward pressure on the rate of inflation2011: QB6d 10 marksDiscuss the advantages and disadvantages of a floating exchange rate.2010: QA2e 4 marksExplain one advantage and one disadvantage for the UK economy of a fall in the exchange rate of sterling.2009: QA1e 4 marksExplain how an increase in the price of timber is likely to affect:The UK balance of tradeThe exchange rate of sterlingAlso in Balance of Payments2008: QA1e 2 marksExplain the effect a rise in the price of oil might have on the foreign exchange value of sterling.2008: QA2b(ii) 3 marksExplain how an increase in interest rates is likely to affect the exchange rate of sterling.2007: QB4a 8 marksThe 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.2007: QB4B 10 marksThe 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.SQP: QA2f 3 marksExplain how the change in interest rates from 2003 to 2004 could have caused the change in exchange rates in those years.SQP: QA2G 4 marksIn 2004, UK employment in manufacturing fell by over 100,000. Explain how this fall could have been partly caused by the change in the exchange rates of sterling from 2003 to 2004.PATTERNS OF UK TRADEThe International Economy: Outcome 12013: QB2d 6 marksExplain 3 reasons why a multinational firm may choose to locate in Scotland.2012: QA2g(i) 3 marksSuggest 3 reasons why foreign firms might decide to locate in Scotland.2012: QA2g(ii) 2 marksExplain one possible disadvantage of this foreign investment to the Scottish economy.2011: QB4b 6 marksExplain why foreign firms may wish to locate in Scotland.2011: QB4C 8 marksDescribe some of the costs and benefits of Foreign Direct investment for the Scottish Economy.2009: QB5a 6 marksIn the second quarter of 2007, Scottish manufactured exports grew at their fastest rate for 5 years.

Suggest and explain reasons for the record growth of Scottish manufactured exports.2008: QB5a 8 marksOne effect of the growth of world competitiveness has been to make the demand for internationally traded goods more price elastic.

Suggest and explain reasons for the increased competitiveness in world markets.2007: QA1e(i) 2 marksGive 2 reasons why an American company might wish to set up a factory in Britain.2007: QA1e(iI) 4 marksSuggest and explain 2 reasons for productivity levels in foreign-owned companies in the UK being higher than in British-owned companies in the UK.The International EconomyHigher Economics

Past Paper QuestionsTopic 1The International EconomyHigher Economics

Past Paper QuestionsTopic 2THE EUROPEAN UNIONThe International Economy: Topic 22012: QB2c 5 marksDescribe the possible impact on the UK economy of economic recovery in other EU states.2012: QB5b 12 marksExplain the main economic advantages and disadvantages to the UK of membership of the European Union.2011: QB4d 8 marksExplain the main economic benefits that could arise for the Scottish economy of the UK joining the Eurozone.2009: QB6c 10 marksArgue the case for and against the UK joining the Eurozone.2009: QB4a 8 marksDespite the UKs reluctance to join the Eurozone, a 2006 report stated that Britain remained the favourite European destination for foreign investment projects.

Suggest and explain reasons for the UKs reluctance to join the Eurozone2008: QB6a 12 marksOne reason why Romania and Bulgaria joined the EU in 2007 was to increase their rate of economic growth.

Explain the advantages and disadvantages for the UK economy of EU enlargement.2007: QA2a(i) 2 marksExplain what is meant by minimum guaranteed price.2007: QA2a(iI) 2 marksDraw a diagram to show how the EU minimum guaranteed price created sugar surpluses.2007: QA2g 3 marksExplain how the predicated changes in the EUs sugar trade are likely to affect the future value of the Euro.SQP: QB5c 7 MarksOther than falling average total costs, explain some advantages and disadvantages for the UK of EU enlargement.SQP: QB6c 4 MarksExplain how the EU both promotes and restricts free trade.INTERNATIONAL TRADING AND MONETARY ORGANISATIONSThe International Economy: Outcome 22013: QB6c 6 marksDescribe the main roles of the: World Trade OrganisationInternational Monetary Fund2009: QA2a(i) 2 marksExplain the term: World Trade Organisation2009: QA2b(i) 2 marksExplain how membership of the World Trade Organisation resulted in an increase in Chinas economic growth.2007: QA2bc 2 marksSuggest why the move to reduce the minimum guaranteed price has been welcomed by the WTO.SQP: QB2c 7 marksDescribe some of the activities of the WTO and the World Bank.RELATIONS: DEVELOPED AND DEVELOPING ECONOMIESThe International Economy: Outcome 22011: QB5a 8 marksLess developed countries (LDCs) faced problems during the recession of 2009 partly because the demand for many of their exports is price inelastic but income elastic.

Describe some other economic problems facing LDCs.2010: QB1b 10 marksDescribe ways in which developed countries can help increase the growth rates of developing economies.2010: QB1c 9 marksDiscuss the advantages and disadvantages for the UK of increased growth rates in developing countries.2009: QA1h 5 marksExplain one reason for the increase in the number of building projects in some developing countries.

Explain how the increase in building projects in China and developing countries will affect the price of garden sheds in the UK.2009: QA2g 4 marksSuggest and explain 2 economic problems Chinas industrial revolution has created for the rest of the world.2009: QB5c 10 marksDescribe some measures developed countries could take to increase the growth rates of developing countries and explain how these measures would work.2008: QA1dSuggest and explain one reason for the high rate of economic growth in China. (2 marks)

Explain how the UK might benefit from a high rate of economic growth in the US. (2 marks)2008: QB2c 9 marksExplain how developed countries can help to increase the economic growth rates of developing countries.2007: QA2f(ii) 2 marksExplain how the dumping of huge sugar surpluses on the world sugar market has caused economic problems for sugar farmers in developing countries.The International EconomyHigher Economics

Past Paper QuestionsTopic 2