CIE A Level Economics
CIE A Level Economics 11 International Economic Issues Exam Questions
Free CIE A Level Economics revision for 11 International Economic Issues: what you need to know, common mistakes and exam-style questions with answers. Covers balance of payments policies, exchange rates, economic development and its indicators, aid, FDI, multinational companies and globalisation.
Practise 11 International Economic Issues with past papers
Once you have learnt this topic, find the 11 International Economic Issues questions in real CIE A Level Economics past papers and mark them with the mark scheme. Doing lots of real questions is the quickest way to learn how examiners ask about each idea.
About CIE A Level Economics 11 International Economic Issues
Topic 11 is the final A Level section of the Cambridge 9708 syllabus. It extends AS topic 6 by looking at policies to correct balance of payments disequilibrium, including the Marshall-Lerner condition and J-curve effect, and at how exchange rates are determined and how they affect the economy. Most of the topic is about economic development: how it differs from growth, indicators such as HDI, the characteristics of countries at different levels of development, population structure, and the relationships between countries through trade, aid, foreign direct investment, multinational companies and external debt. It ends with globalisation, its causes and its costs and benefits. Essay questions often ask about aid, multinationals and globalisation.
What you need to know
- 11.1 Balance of payments policies Expenditure switching and expenditure reducing policies, plus supply-side measures. The Marshall-Lerner condition says a depreciation improves the current account if the sum of the price elasticities of demand for exports and imports exceeds 1. The J-curve shows the current account worsening first before it improves.
- 11.2 Exchange rates Floating rates depend on demand for and supply of a currency, driven by trade, interest rate differentials, speculation and investment flows. Know purchasing power parity and the effects of exchange rate changes on inflation, growth and employment.
- 11.3 Economic development Development is a broader improvement in living standards, including health, education, freedom and choice, not only higher real GDP. Indicators include HDI, the Multidimensional Poverty Index and measures such as access to clean water.
- 11.4 Characteristics of countries Countries at different levels of development differ in population growth, age structure, dependency ratio, income distribution, employment structure (primary, secondary and tertiary) and urbanisation.
- 11.5 Relationships between countries Trade, aid (bilateral, multilateral, tied), foreign direct investment by multinational companies, and external debt. Know the role of the World Bank and the International Monetary Fund.
- 11.6 Globalisation The growing integration of economies through trade, capital flows, technology and migration, driven by lower transport and communication costs and trade liberalisation. Benefits include specialisation and investment; costs include inequality, environmental damage and exposure to global shocks.
Common mistakes in 11 International Economic Issues
- Treating economic growth and economic development as the same. Growth is a rise in real output; development is a wider improvement in welfare and choices.
- Stating the Marshall-Lerner condition the wrong way round. A depreciation improves the current account only if the combined PEDs for exports and imports are greater than 1.
- Assuming foreign aid always helps development. Tied aid, corruption, dependency and debt can reduce its effectiveness.
- Writing only about the benefits of multinational companies. Balanced answers include profit repatriation, transfer pricing, use of local resources and environmental effects.
- Describing HDI as an income measure. It combines life expectancy, education and GNI per head.
Try three 11 International Economic Issues exam-style questions
1. Explain the J-curve effect following a depreciation of a currency. (4 marks)
Show the mark scheme answer
Immediately after depreciation, contracts and habits mean volumes of exports and imports change little; imports cost more in domestic currency and exports earn less foreign currency, so the current account worsens; over time demand responds as PEDs rise; the current account then improves, giving a J shape.
2. Country Z has 30 million people aged under 15, 10 million over 64 and 60 million aged 15 to 64. Calculate the dependency ratio. (2 marks)
Show the mark scheme answer
Dependants = 30 + 10 = 40 million; dependency ratio = 40 / 60 x 100 = 66.7 (dependants per 100 people of working age).
3. Discuss whether foreign direct investment by multinational companies benefits developing economies. (20 marks)
Show the mark scheme answer
Benefits: capital inflow, jobs, transfer of technology and skills, tax revenue, exports and multiplier effects; costs: profit repatriation, low wages, transfer pricing, crowding out of local firms, environmental damage and political influence; outcome depends on regulation, linkages with local firms, type of industry and bargaining power of the host government; justified judgement.
11 International Economic Issues FAQs
What does Cambridge International AS and A Level Economics topic 11 International Economic Issues cover?
It covers policies for balance of payments disequilibrium, exchange rates, economic development and its indicators, characteristics of countries at different levels of development, relationships between countries and globalisation.
Which paper is topic 11 examined in?
It is A Level content, assessed in Paper 3 and Paper 4, with AS topic 6 assumed.
What examples should I learn for topic 11?
Learn current examples of aid, foreign direct investment and globalisation in a few countries you know well, and be ready to use HDI and dependency ratio figures to compare countries.
