Economics 2281 · O Level · Globalisation, free trade and protection
Globalisation, free trade and protection — practice question
Mexico has a long record of trade deficits. The government is steering the economy nearer to free trade in an effort to improve macroeconomic performance. In 2017 it was forecast that Mexico’s economy would see a slight increase in unemployment. In 2017, inflation in the economy stood at 6.6%, the highest level since 2001. Several policy tools could be used to bring inflation down, including raising the rate of income tax.
(a)[2]
Define what trade in goods balance means.
(b)[4]
Explain two benefits producers may obtain from free trade.
(c)[6]
Analyse, using a production possibility curve (PPC) diagram, the effect of an increase in unemployment on an economy.
(d)[8]
Discuss whether an increase in the rate of income tax will bring inflation down.
Worked solution & mark scheme
This 20-mark question has a full step-by-step worked solution and mark scheme. One marking point: “Value of exports of goods minus value of imports of goods” …