Economics 0455 · IGCSE · Globalisation, free trade and protection
Globalisation, free trade and protection — practice question
Although 15% of US exports are sold to Mexico, Mexico sends 80% of its exports to the US. In 2019, the US government introduced some protection methods to cut imports from Mexico. That US move led to a decline in Mexico’s foreign exchange rate. Even though inflation rose, Mexico’s central bank lowered the rate of interest from 7.75% at the end of 2019 to 6.5% in March 2020.
(a)[2]
Identify any two protection methods.
(b)[4]
Explain two reasons why a government might wish to reduce imports.
(c)[6]
Analyse how a fall in a country’s foreign exchange rate could raise its inflation rate.
(d)[8]
Discuss whether or not a decrease in the rate of interest will increase a country’s GDP.
Worked solution & mark scheme
This 20-mark question has a full step-by-step worked solution and mark scheme. One marking point: “Tariffs.” …