About International economic issues (further) in A Level Economics
International economic issues (further) is one of the 11 main topics in our A Level Economics (Cambridge (CAIE) 9708) question bank, and about 7% of its real questions come from it. Tayyari Karo has 61 real questions on this topic from 2021 to 2026, from Paper 3, Paper 4; 44 are multiple choice and marked instantly, and the rest are structured questions with a model answer. By difficulty: 30 medium, 24 hard, 7 easy.
Work through the questions below, then open the explanation for each one. Redo the ones you missed a few days later.
Try 8 real questions
These are real past-paper questions. Think of your answer first, then open the explanation.
May/June 2026 · Paper 3 · International economic issues (further)
Iceland had a Human Development Index value of 0.95 in 2023. What could explain this?
- Iceland had high gross national income per head.
- Iceland had high rates of environmental damage.
- Iceland had low average life expectancy at birth.
- Iceland had low rates of population growth.
Show answer and explanation
Answer: A. Iceland had high gross national income per head.
HDI combines income per head, life expectancy and education; a high value reflects high income per head (and long life, good education).
May/June 2025 · Paper 3 · International economic issues (further)
An economy imports a large proportion of its raw materials. Its exchange rate depreciates. What is the impact on the external and internal value of money?
- external value of money: rises; internal value of money: rises
- external value of money: rises; internal value of money: falls
- external value of money: falls; internal value of money: rises
- external value of money: falls; internal value of money: falls
Show answer and explanation
Answer: D. external value of money: falls; internal value of money: falls
A depreciation means the exchange rate (external value of money) falls by definition. Because the economy imports a large share of its raw materials, the depreciation raises the domestic price of imported inputs, causing cost-push inflation, which reduces the purchasing power (internal value) of money too.
October/November 2025 · Paper 3 · International economic issues (further)
A country's trade balance has worsened. The country has a fixed exchange rate. Which additional changes for unemployment and price level are likely to follow? (the price level / the level of unemployment)
- decreases / decreases
- increases / decreases
- decreases / increases
- increases / increases
Show answer and explanation
Answer: C. decreases / increases
A worsening trade balance means falling net exports, a component of AD, reducing AD; under a fixed exchange rate the currency cannot depreciate to correct this automatically, so AD falls, national income falls, unemployment rises, and downward pressure reduces the price level.
October/November 2025 · Paper 3 · International economic issues (further)
There is a rise in the domestic rate of interest in an economy. This economy has a fixed exchange rate. What would be the impact on the current and financial accounts of the balance of payments? (financial account / current account)
- improves / improves
- worsens / improves
- improves / worsens
- worsens / worsens
Show answer and explanation
Answer: A. improves / improves
Higher domestic interest rates attract inflows of foreign capital seeking better returns, improving the financial account; under a fixed exchange rate this capital inflow can also support the currency, and higher interest rates dampen domestic demand (including demand for imports), which can improve the current account too.
May/June 2024 · Paper 3 · International economic issues (further)
What will increase the size of a country's optimum population?
- a rise in the birth rate
- a lowering of the age of retirement
- a rise in the stock of capital available in the country
- a decrease in the productivity of the country's industries
Show answer and explanation
Answer: C. a rise in the stock of capital available in the country
The optimum population is the population size that maximises output (income) per capita given the country's available resources. An increase in the capital stock raises the productive capacity of the economy, allowing a larger population to be supported at (or above) the same output per head, so it raises the optimum population.
October/November 2022 · Paper 3 · International economic issues (further)
A developing (low-income) economy is heavily dependent on the production of primary products. A multinational car manufacturing company invests in the country and builds a new factory. What will not be a long lasting benefit of the company's investment in the developing economy?
- The company introduces new technology to the economy.
- The company provides diversification of production for the economy.
- The company provides skills training for local workers.
- The company purchases non-renewable local construction materials for the factory.
Show answer and explanation
Answer: D. The company purchases non-renewable local construction materials for the factory.
Purchasing non-renewable local construction materials is a one-off transaction during construction, using up a finite/depletable resource — not a long-lasting benefit, unlike ongoing technology transfer, diversification of production, or skills training that leave lasting capability in the economy.
May/June 2026 · Paper 4 · International economic issues (further)
Japan interest rates extract (weak yen helped the balance of trade and encouraged export sales, especially transportation equipment, and foreign visitors increased; the yen was seen as needing support to restore confidence and reduce imported inflation). (c) Consider the extent to which a depreciation of the yen has been beneficial for Japan's balance of trade in goods and services. [6]
Show model answer
Benefits from the article: encourages export sales despite relatively low global growth (1) because export prices are lower (1); lower global incomes offset by lower prices of Japanese products (1); foreign visitors increased as it is cheaper for tourists (1) and they spend in Japan (1). Contrast: the yen needed strengthening to restore investor confidence and reduce imported inflation (1), with an explanation of how investor confidence could improve the balance of trade (1). Credit reference to price elasticity of demand for imports and exports (1). Maximum 4 marks if no contrast.
A weaker yen makes exports cheaper and Japan cheaper for tourists, helping the trade balance, but it raises imported inflation and may need support; the effect depends on price elasticities of demand for imports and exports.
May/June 2025 · Paper 4 · International economic issues (further)
'A free trade area gains all the benefits associated with being a member of a customs union while avoiding all the costs associated with being a member of a customs union.' Evaluate this statement.
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Indicative content — AO1/AO2: a free trade area removes tariffs/quotas on products traded between member countries; a customs union additionally abolishes internal tariffs while adopting a common external tariff on non-members; a country in a free trade area can achieve faster growth through specialisation and access to a wider (global) market; the absence of import tariffs reduces costs for firms, raising incomes, competition and potentially labour productivity; a customs union can achieve similar benefits to a free trade area, but its key difference is the common external tariff, giving members shared protection from outside competitors alongside access to a large single market; a customs …
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