Every question, cut by section

Which of the following is best described as a CHARACTERISTIC of globalisation — something globalisation looks like — rather than a cause or an effect of it?

A country joins a customs union. Its consumers switch from buying a good from a domestic producer (who could only ever produce profitably at a higher cost than any foreign supplier) to buying it from a bloc-partner producer whose cost is lower than the domestic producer's, but still higher than the cheapest producer in the rest of the world. What is this switch called?

An illustrative country's income distribution, poorest to richest quintile, holds these shares of total income: 10%, 14%, 18%, 24%, 34% (income shares constructed for this question, not real country data).

Using the trapezoidal-rule method from the worked example above, what is this country's Gini coefficient, to two decimal places?

A country's mean years of schooling stays unchanged this year, but its expected years of schooling rises because more children are newly enrolling in secondary school. Holding health and income constant, what happens to the country's HDI?

Solaria can produce 8 tonnes of rice or 4 tonnes of steel per worker-hour. Emberwood can produce 5 tonnes of rice or 1 tonne of steel per worker-hour. Which country has the comparative advantage in steel?

A country's exports have a price elasticity of demand of 0.45; its imports have a price elasticity of demand of 0.5. It is considering a devaluation to improve its current account. Based on the Marshall-Lerner condition, what should it expect?

A transnational corporation's subsidiary in a high-tax country sells components to its own subsidiary in a low-tax country at a price well below what an unrelated buyer would pay, shifting reported profit toward the low-tax country. What is this practice called, and how might a government most directly try to limit it?

Which of the following is most accurately classified as a possible COST of globalisation, rather than a possible benefit?

A UK-based fund manager buys a portfolio of Japanese government bonds. Which part of the UK's balance of payments does this transaction appear in?

A government spends £2bn building a new hospital, and separately spends £2bn paying the salaries of nurses and doctors already working in existing hospitals. How should these two items of spending be classified?

A country becomes significantly more open to trade over 20 years. Its GDP rises, but income inequality between its highly-skilled and low-skilled workers also rises. Which of these is correctly classified purely as an EFFECT of globalisation for this country — not a cause or a characteristic?

A country's average export and import price indices are recorded as: 2021 — export price index 115, import price index 110. 2023 — export price index 138, import price index 121.5.

Calculate the percentage change in the terms of trade index between 2021 and 2023, to 1 decimal place. (VERIDIAN-original figures, testing the percentage vs percentage-point error pattern confirmed across the archive — not a reproduction of any real past-paper question.)

A country shifts a large share of its workforce out of subsistence agriculture and into urban manufacturing over two decades. National average income rises sharply, but a specific cohort of older, low-skilled former farmers who did not relocate or retrain sees no improvement in its own income. Which spec-named cause of a change in poverty does this scenario primarily illustrate?

A model states that a country's sustainable growth rate equals its savings ratio divided by its capital-output ratio. Which named model is this, and what is the resulting shortfall — between savings actually generated and the savings a target growth rate requires — called?

Which one of the following is a genuine limitation of the basic comparative-advantage model, rather than one of its stated conclusions?

A think tank defines a household as being in relative poverty if its income is below the national median income. What is true of this definition, in every country and every year it is applied?

A country's real GDP grows by 5% this year, but life expectancy, mean years of schooling, and the poverty rate are all unchanged. What can you conclude?

Country A needs fewer labour hours than Country B to produce one unit of both Good 1 and Good 2 — it has an absolute advantage in both. Which one of the following is true?

Country X pays its workers noticeably higher average wages than Country Y. Based on this fact alone, can you conclude Country X has higher unit labour costs — and so is less cost-competitive — than Country Y?

A worker earning £45,000 pays £9,000 in total income tax. A second worker earning £90,000 pays £22,500 in total income tax. What does this tell you about the tax system?

Domestically, a car costs £28,000 to produce. An identical car, produced and shipped from a foreign country, costs £24,000 before any tariff is applied. The home country cuts its import tariff on cars from 20% to 5%. What happens to the foreign car's competitiveness in the domestic market?

A government imposes a tariff specifically on imported steel after steel from a foreign state-owned producer is sold in the domestic market below its own cost of production. Which reason for restricting trade does this best illustrate?

A government introduces a new tax specifically on the ownership of second homes and financial-asset portfolios above a high threshold, leaving income tax rates unchanged. Which measure of inequality does this policy most directly target?

A country facing a short-term currency crisis needs emergency lending, conditional on macroeconomic policy reform, to stabilise its balance of payments. A separate country wants a long-term loan to fund a specific rural electrification project. Which international institutions should each approach, respectively?

A country's terms of trade index rises this year. Which of the following is the ONLY conclusion this fact, by itself, allows you to draw?

A retired individual has no wage income this year but owns a paid-off house worth $400,000 and a $250,000 investment portfolio. A young graduate earns a $60,000 salary but has no savings and $30,000 of student debt. Who has the greater wealth, and who has the greater income this year?

A government builds a new national fibre-optic broadband network and funds vocational training colleges, on the grounds that no private telecoms firm sees enough return to build the network alone, and no private employer will pay to train workers a rival could immediately poach. Which category of strategy is this, and why?

Two countries' opportunity costs of producing one unit of Good A, measured in units of Good B given up, are: Country P = 2 units of B; Country Q = 5 units of B. Which country has the comparative advantage in Good A?

A central bank wants to support its currency's value without changing its policy interest rate. It instructs its reserve managers to sell part of the country's foreign-currency reserves and use the proceeds to buy its own currency on the open market. Which intervention tool is this?

A country's actual output returns fully to its estimated potential output — the output gap closes to zero — yet the government still records a fiscal deficit of 3% of GDP that year. What does this deficit represent?

Vietnam's manufacturing sector has expanded rapidly over the past decade, drawing FDI from many countries. By the mid-2020s, Japan had overtaken every other country to become Vietnam's single biggest source of FDI, having put $3.4 billion into the country.

Explain, using the stimulus, why this scale of Japanese FDI is not automatically a pure benefit for Vietnam's economy, even though it is a clear characteristic of globalisation deepening.

Before a tariff, a country imports 500,000 tonnes of a good at the world price. A government then imposes a per-unit tariff. At the new, higher domestic price, domestic quantity supplied has risen and domestic quantity demanded has fallen, so the quantity still being imported has shrunk to 200,000 tonnes.

On the standard tariff diagram, the government's tariff revenue is best represented by:

A recession causes government tax revenue to fall and unemployment-benefit spending to rise, without a single new law being passed or a minister deciding anything new. What best describes this change?

A good is only traded internationally if the price gap between two countries' domestic prices for it is larger than the cost of moving it between them. Based on this condition, why is FALLING transport and communication costs classified as a CAUSE of globalisation, rather than something that merely happens alongside it?

A government replaces an import tariff with an import quota set at the same import volume the tariff was producing. World demand for the good then unexpectedly rises. What is most likely to happen under the quota that would NOT happen under the original tariff?

A country's Gini coefficient is reported as falling from 0.41 to 0.35 over five years.

Which one of the following correctly describes what happens to the country's Lorenz curve over the same period?

Two countries have identical GDP per capita. Country A has 55% of its adult male labour force employed in agriculture; Country B has 12%. Which is the most defensible inference from this single indicator alone?

A country's currency depreciates sharply against its trading partners' currencies, while its underlying opportunity costs of production are unchanged. What is the most likely immediate effect on its pattern of trade?

Pakistan's rupee depreciated substantially against the US dollar amid a persistent current-account deficit, before the country turned to the IMF for support — a real pattern this course's research verified directly against the October 2023 mark scheme and examiner report.

A data-response question asks for the likely SHORT-RUN effect of the depreciation on Pakistan's trade balance, and separately the likely LONG-RUN effect, assuming the Marshall-Lerner condition holds. Which answer correctly distinguishes the two? (VERIDIAN-original, testing the same mechanism developed in the worked chain above.)

Ghana's government proposed introducing an additional top marginal income-tax rate of 35% on the highest earners, above the existing top rate (a real proposal referenced in Pearson's own January 2025 source booklet). Two economic advisers disagree: Adviser A predicts this will raise more tax revenue from high earners; Adviser B predicts it could reduce total revenue collected from that group.

Using the Laffer curve, explain the condition under which each adviser would be correct. (VERIDIAN-original, referencing a real verified context — not a reproduction of any past-paper question.)

Pearson's June 2025 mark scheme credits "delays/uncertainty in global shipping ... are encouraging some TNCs to reshore production/simplify their supply chains" as evaluation content on a question asking candidates to examine two factors that contributed to increased globalisation. Why is a reshoring trend a legitimate evaluative point on a CAUSES question, rather than an irrelevant tangent onto effects?

A country's central bank has pegged its currency to the US dollar for a decade. The government now announces it is officially resetting the peg to a weaker rate against the dollar. What is this called?

A government's tax revenue this year includes both corporation tax, charged on company profits, and VAT, charged on consumer spending. Which classification is correct?

Under Pearson's WEC14 spec, rising net international migration of workers is classified as...

Before joining a trading bloc, Country Z always imported its textiles from Country Y (outside the bloc), the world's lowest-cost producer, at a tariff-inclusive price of $30/unit ($22 world price + an $8 common external tariff). Country Z's own domestic textile producers have never been able to profitably supply below $34/unit, even before any tariff was applied. After Country Z joins a bloc with Country X, Country X's textiles enter tariff-free at $26/unit — Country X's own production cost, since it is a bloc partner.

What does the switch in Country Z's import source, from Country Y to Country X, represent?

Country Z's Gini coefficient fell from 0.52 to 0.46 over an eight-year period in which the government introduced a new means-tested child benefit funded by a rise in the top rate of income tax, while GDP per capita grew by 18% in real terms over the same period. (Country Z and its figures are illustrative, constructed for this question — not real country data.)

Which one of the following best explains the fall in Country Z's Gini coefficient, using the mechanisms covered in this lesson?

A developing country's government removes fuel subsidies, sells its state-owned telecommunications company to private investors, and allows its currency to float freely for the first time, having previously fixed it well above its market value.

Classify this policy package and identify its most likely short-run effect on the poorest households, before any longer-run efficiency gain has had time to appear.

Real wages in China have risen substantially over the past two decades. Some multinational manufacturers that previously produced textiles and other labour-intensive goods in China have since relocated that production to lower-wage economies elsewhere, or brought it back to the developed economies where the finished goods are ultimately sold.

Using the concept of comparative advantage, explain why a rise in a country's wage costs can shift the pattern of world trade even without any change in that country's technology or skills. (VERIDIAN-original, same command-word/mark-tariff pattern as a real Section B 'explain' item — not a reproduction of any specific past-paper question.)

Two countries' Lorenz curves are drawn on the same axes, starting and ending at the same points. Country A's curve lies closer to the 45° line of perfect equality than Country B's does, at every point along it. What can you conclude?

A country has a savings ratio of 12% of GDP and a capital-output ratio of 3. Using the Harrod-Domar model, what growth rate can this savings ratio sustain?

Country M needs 4 labour-hours to produce 1 tonne of steel and 8 hours to produce 1 tonne of textiles. Country N needs 6 hours for 1 tonne of steel and 12 hours for 1 tonne of textiles. What does comparative-advantage theory predict about specialisation and trade between them?

Country A pays average annual wages of $30,000 per worker, with each worker producing 50,000 units a year. Country B pays lower average wages of $25,000 per worker, but each worker produces only 40,000 units a year.

Based on relative unit labour costs, which country is more cost-competitive? (VERIDIAN-original — same calculation pattern as the RULC content above.)

A government increases its borrowing to fund a rise in current expenditure, while the total pool of loanable funds in the economy stays roughly the same. What is the most likely effect on private-sector investment, and through which mechanism?

A German car manufacturer has historically exported finished cars to Vietnam. Vietnam then raises its import tariff on finished cars. In response, the manufacturer builds an assembly plant inside Vietnam instead, so the cars it sells there no longer cross the border as finished imports. Which reason for FDI does this best illustrate?

Nation P is heavily dependent on exporting a single agricultural commodity. A prolonged drought sharply reduces the physical volume Nation P is able to harvest and export, while world demand for the commodity is largely unchanged. As a result, the commodity's world price rises sharply. Nation P's import price index is unaffected by the drought.

Explain, using the terms of trade, why Nation P's terms of trade index and its trade balance could move in OPPOSITE directions at the same time.

At a tax rate of 0%, government revenue is £0. At a tax rate of 100%, revenue is also £0, because nobody has a financial reason to earn, declare or invest income the state will take all of. What must be true of revenue somewhere between these two rates?