Economics 0455 · IGCSE · Globalisation, free trade and protection
Globalisation, free trade and protection — practice question
Mexico has a long record of trade deficits. The government is trying to move the economy nearer to free trade in order to improve macroeconomic performance. In 2017, it was forecast that Mexico’s economy would see a slight increase in its unemployment rate. During 2017 the inflation rate in the economy stood at 6.6%, the highest level since 2001. Several policy actions could be used to cut inflation, including raising the rate of income tax.
(a)[2]
Define what is meant by trade in goods balance.
(b)[4]
Explain two advantages producers may obtain from free trade.
(c)[6]
Analyse, using a production possibility curve (PPC) diagram, the consequences for an economy of a rise in unemployment.
(d)[8]
Discuss whether or not raising the rate of income tax will reduce inflation.
Worked solution & mark scheme
This 20-mark question has a full step-by-step worked solution and mark scheme. One marking point: “The monetary value of goods exported minus the monetary value of goods imported” …