O Level Economics: International trade and exchange rates, questions with answers

A country decides to specialise in making low-cost mass-produced clothing.
Which factor is most likely to have influenced this decision?

1. a large low-skilled workforce
2. a shortage of raw materials to make cloth
3. high transport costs for completed garments
4. strong competition in the international market for clothes

An economy raises its tariffs on imported goods. What is the most likely result?

1. a fall in the rate of inflation
2. an increase in consumer choice
3. an increase in domestic production
4. the current account of the balance of payments moves into a deficit

What might encourage international specialisation between countries?

1. free trade
2. inefficiencies in production
3. labour immobility
4. tariffs

Which policy measure is most likely to reduce the current account deficit of the balance of payments of an economy?

1. decrease the level of subsidies to domestic producers
2. increase infrastructure spending to increase domestic productivity
3. increase interest rates
4. remove import tariffs

The governments of low-income countries often allow foreign multinational companies (MNCs) to mine minerals in their country. Which conflict between benefit and cost might this cause the low-income countries?

1. benefit: improved balance of trade; cost: training by the MNCs
2. benefit: higher employment; cost: loss of a finite resource
3. benefit: increased profits for the MNCs; cost: efficient production
4. benefit: more sustainable development; cost: economic growth

Which method of protection always reduces the supply of an imported good to zero?

1. embargo
2. quota
3. subsidy
4. tariff