Economics 2281 · O Level · Globalisation, free trade and protection
Globalisation, free trade and protection — practice question
Although 15% of US exports go to Mexico, 80% of Mexico’s exports go to the US. In 2019, the US government introduced some protectionist measures to cut imports from Mexico. This US action led to a drop in Mexico’s foreign exchange rate. Even with a higher inflation rate, Mexico’s central bank cut the rate of interest from 7.75% at the end of 2019 to 6.5% in March 2020.
(a)[2]
Identify any two methods of protection.
(b)[4]
Explain two reasons a government may wish to cut imports.
(c)[6]
Analyse how a drop in a country’s foreign exchange rate could raise its inflation rate.
(d)[8]
Discuss whether or not a reduction in the rate of interest will raise 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: “Import tariffs” …