These eight questions use invented islands, currencies and figures. Write your own working first, then open each answer.
Attempt them against the clock with the timed original practice session builder. The lessons are in globalisation and international trade.
Questions 1 to 4: reasons, restrictions and rates
Question 1. Pulau Karang has plenty of fish but no timber. Give one reason it might trade, with an explaining sentence.
Answer
Differences in resources. Pulau Karang has no timber, so the only way to have timber is to import it, paying with fish it has plenty of.
Question 2. An imported kettle sells for RM80. A 10% tariff is added. Find the new price and the revenue per kettle.
Answer
The tariff is 10% of RM80 = RM8. The new price is RM88 and the revenue is RM8 per kettle.
Question 3. Explain in one sentence the difference between how a tariff and a quota raise an import’s price.
Answer
A tariff adds a tax, so the price rises directly. A quota limits the quantity, so supply is capped and the price rises because of the shortage.
Question 4. The rate moves from RM1 = SR5 to RM1 = SR4. State what happened to the ringgit.
Answer
RM1 now buys 4 SR instead of 5, so the ringgit has depreciated.
Questions 5 to 8: effects and payments
Question 5. An import costs SR300. Find its ringgit cost at SR5 per RM1 and at SR4 per RM1.
Answer
At SR5: 300 ÷ 5 = RM60. At SR4: 300 ÷ 4 = RM75. The import became dearer after the depreciation.
Question 6. An export sells for RM50. Find the foreign price at SR5 per RM1 and at SR4 per RM1. What does it show about the effect of depreciation on exports?
Answer
At SR5: 50 × 5 = SR250. At SR4: 50 × 4 = SR200. The export is cheaper for foreign buyers after a depreciation, which can help sales under the right conditions.
Question 7. Goods exports RM90 million, goods imports RM70 million, services received RM15 million, services paid RM25 million. Find the balance on goods and services.
Answer
Goods: 90 − 70 = +20. Services: 15 − 25 = −10. Together: 20 − 10 = +10, a surplus of RM10 million.
Question 8. A student says: “A services deficit shows the island’s tourism is failing.” Comment.
Answer
The table gives one figure for one period. It cannot show why more was paid out than received, or whether tourism is weak, because there are no earlier figures or breakdown. The supported statement is “more was paid out than received on services in this period”.
If you got some wrong
Question 1 links to explaining reasons for trade. Questions 2 and 3 link to comparing trade restrictions by mechanism. Questions 4 to 6 link to interpreting exchange rate changes, and questions 7 and 8 link to reading balance of payments information.
If you want a teacher to read your working, see online one-to-one Economics tuition.