440 exam-style questions on The global economy with answers and explanations. Six real samples below — the full set is free with an account.
The imposition of a tariff on an imported good will typically
Answer: raise the domestic price and reduce imports
A tariff raises the price of imports, so domestic price rises, imports fall, domestic production rises, and consumer surplus falls.
A depreciation of a country's currency will tend to
Answer: make exports cheaper and imports dearer
A weaker currency lowers foreign-currency export prices (boosting exports) and raises the price of imports, which can improve the current account (subject to the Marshall-Lerner condition).
A customs union is best described as
Answer: a free trade area with a common external tariff
A customs union removes internal trade barriers AND adopts a common external tariff, going a step further than a free trade area.
A tariff imposed on imported steel is most likely to
Answer: raise government revenue and reduce imports
A tariff raises the price of imports, reducing the quantity imported and generating revenue on the imports that still enter. Domestic consumers pay more, so consumer surplus falls.
Which of the following is a protectionist measure?
Answer: Imposing an import quota
An import quota is a physical limit on the quantity of a good that may be imported, restricting trade to protect domestic producers.
A domestic furniture producer begins exporting to a much larger foreign market. Which benefit of international trade does this best illustrate?
Answer: Economies of scale from producing for a larger market
Exporting enlarges the firm's market, allowing higher output levels at which average costs fall — economies of scale are a key gain from trade.
That was 6 of 440 The global economy questions.
Practise all 440 freeA student writes: 'Workers in Country A are paid far less than workers in Country B, so Country A must have a comparative advantage in every good.'
See the correction →A student writes: "The tariff makes domestic consumers pay $3 million more, and the government collects $3 million in tariff revenue, so the country as a whole is no worse off."
See the correction →A student writes: "A tariff on imported clothing saves 5 000 jobs in domestic clothing factories, so it raises total employment in the economy."
See the correction →StateAO1 · 1–2 marks
One word or one short sentence. No explanation, no working: the mark is for the fact itself.
OutlineAO1 · 1–2 marks
A brief account or summary: the main points in two or three sentences, no evaluation.
ExplainAO2 · 2–10 marks
Give reasons or causes: say what happens AND why, linking each step with 'because' or 'so that'.
440 The global economy questions — free with an account. Spaced repetition, streaks and full exam simulations included.
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