IAL Economics Unit 4 Edexcel Trade and Currency Questions

Between June 2018 and October 2019 the Australian dollar fell by 7.4% against the

US dollar.

Ceteris paribus, which one of the following is the most likely impact of this

depreciation on Australia’s economy?

• A fall in the price of imports and a rise in the price of exports

• An increase in public sector borrowing and an increase in national debt

• An improvement in the capital and financial account of the balance of payments

• A decrease in the cost of borrowing and a decrease in the reward for saving

In 2019 India’s international competitiveness rank was 10 places lower than it was

in 2018.

Which one of the following is the most likely reason for this fall in India’s international

competitiveness?

• A decrease in its inflation rate relative to other countries

• A decrease in its unit labour costs relative to other countries

• A decrease in its labour productivity relative to other countries

• A decrease in its transportation costs relative to other countries

The table shows the maximum possible production of cars and lorries by Country A and

Country B in a given year. Which one of the following can be deduced from this table?

• Both countries will not benefit from specialisation and trade

• Country A has a comparative advantage over Country B in the production of

  cars and lorries

• Country B has an absolute advantage over Country A in the production of

  cars and lorries

• Country B has a lower opportunity cost of producing lorries whereas

  Country A has a lower opportunity cost of producing cars

In 2018 the value of oil exports accounted for 85% of Nigeria’s GDP.

Which one of the following is most likely to result from a fall in world oil prices?

• A deterioration in Nigeria’s current account deficit

• An improvement in Nigeria’s terms of trade

• An increase in transportation costs in Nigeria

• A reduction in Nigeria’s budget deficit

The table shows Afghanistan’s terms of trade between 2015 and 2017 (2000=100).

Ceteris paribus, which one of the following can be deduced from the data?

• The value of Afghanistan’s imports have risen relative to the value of its

  exports

• The average price of Afghanistan’s exports have fallen relative to the

  average price of its imports

• Afghanistan is likely to experience an improvement in its living standards

• Afghanistan is likely to experience a deterioration in the financial account

  of the balance of payments

The diagram illustrates the production possibility frontiers of Country A and Country B for two products: oranges and pineapples. Given these frontiers, which one of the

following statements is true?

• Country A will export oranges to Country B.

• Country B will not trade oranges and pineapples with Country A.

• Country B has a comparative advantage in the production of oranges.

• Country A has an absolute advantage in the production of pineapples.

Tanzania’s export price index increased from 100 in 2013 to 128.9 in the second

quarter of 2016. Over the same period, the country’s import price index rose from 100

to 117.1.

What was Tanzania’s terms of trade index in the second quarter of 2016?

• 11.8

• 90.8

• 110.1

• 111.8

The graph shows the demand and supply conditions for soya beans in India in 2015 and 2016. The Government guarantees a minimum support price of P1 and operates a buffer stock scheme. When output rose to S(2016), then government expenditure on surplus production

was:

• LUVM

• P2P1VW

• XUVW

• UVW