Question 1
Which one of the following is a role of the World Trade Organisation?
Answer: A.
The other options are incorrect as they describe the functions of different international organisations. Lending money to countries experiencing balance of payments problems (B) and monitoring the stability of the international monetary system (C) are the primary responsibilities of the International Monetary Fund (IMF). Meanwhile, providing low-interest loans to low-income countries (D) for development projects is the main function of the World Bank. While these institutions often work together, they have distinct mandates, and only the WTO focuses specifically on regulating and arbitrating international trade rules.
Question 2
When using data to make international comparisons of the standard of living, purchasing power parity (PPP) exchange rates are more useful than market exchange rates. This is because PPP exchange rates take into account differences in countries’
Answer: C.
Options A, B, and D are incorrect because they focus on secondary factors. While income distribution (A), taxation levels (B), and population growth (D) are all vital for evaluating a country's overall economic welfare, none of these are accounted for by the technical adjustment of PPP exchange rates. PPP specifically corrects for price level disparities to ensure that a basket of goods costs the same in each currency.
What this practice covers
Real past-paper questions, the answer key from the mark scheme, and the explanation that goes with it. Each one is marked the moment you pick, the correct option is shown whether or not you found it, and the full explanation opens either way. No account needed to answer them.
These questions are drawn from past AQA A-Level papers. You answer, you find out immediately whether you were right, and you get the reasoning for the correct option and for each distractor. Wrong answers go to a mistakes locker so you can come back to exactly those.
Practice is free. You need an account only so your progress and your mistakes are still there next time.
What examiners see students get wrong here
These are the errors that cost marks on exchange rates and the balance of payments, taken from our own topic notes. Read them before you practise and you will recognise the traps in the questions.
- Using devaluation for a market-driven fall; that is depreciation.
- Asserting a depreciation improves the current account without the Marshall–Lerner condition.
- Omitting imported inflation and the leftward SRAS shift.
- Saying the balance of payments does not balance; it always does; it is the current account that can be in deficit.
- Treating a current account deficit as automatically harmful, without asking about the cause and how it is financed.
- Confusing demand for and supply of the currency, imports supply the domestic currency.
- Discussing competitiveness only in price terms, ignoring non-price factors.
Revise it first
If any of the above is unfamiliar, work through the notes before practising: Exchange Rates and the Balance of Payments revision notes.