Economics 2281 · O Level · Globalisation, free trade and protection
Globalisation, free trade and protection — practice question
The Indian government gives subsidies to the country’s cotton textile exports. The USA, the biggest purchaser of Indian cotton textiles, gained from this. India intended to end the subsidy by $2019$. Other cotton textile exporters welcomed this. The USA may be only slightly affected, partly because income in the country usually rises. The value of the Indian rupee against the US dollar was fairly steady during this period, though it increased a little in mid-$2017$.
(a)[2]
Identify the distinction between an export and an import.
(b)[4]
Explain how an increase in the income of its main trading partners may influence a country’s trade in goods balance.
(c)[6]
Analyse how an increase in a country’s foreign exchange rate may influence its unemployment rate.
(d)[8]
Discuss whether a government should or should not subsidise its exports.
Worked solution & mark scheme
This 20-mark question has a full step-by-step worked solution and mark scheme. One marking point: “Goods sold abroad are exports; goods bought from abroad are imports” …