Globalisation: five questions to try now
Real past-paper questions, the answer key from the mark scheme, and the explanation that goes with it. No account needed to answer them.
Question 1
The following are four conditions sometimes attached to IMF loans to developing countries. Which condition would conflict with the ‘infant industry’ argument?
Answer: A.
The correct answer is A) the need to allow free trade.
Explanation:
The infant industry argument is an economic rationale for protectionist trade policies to shield developing industries from international competition so they can grow and become competitive in the future. This argument suggests that without protection, these industries could be driven out of the market by more established competitors.
If a country is following the infant industry argument, it would typically want to impose trade barriers like tariffs or quotas to protect its domestic industries. Free trade, on the other hand, advocates for the removal of such barriers to promote international trade and specialisation in production, which could potentially put the infant industries at a disadvantage due to increased competition.
Therefore, the condition the need to allow free trade goes against the concept of protecting infant industries and promoting their growth, making it incompatible with the infant industry argument and potentially conflicting with the objectives of developing countries seeking to protect their domestic industries through trade restrictions.
Explanation:
The infant industry argument is an economic rationale for protectionist trade policies to shield developing industries from international competition so they can grow and become competitive in the future. This argument suggests that without protection, these industries could be driven out of the market by more established competitors.
If a country is following the infant industry argument, it would typically want to impose trade barriers like tariffs or quotas to protect its domestic industries. Free trade, on the other hand, advocates for the removal of such barriers to promote international trade and specialisation in production, which could potentially put the infant industries at a disadvantage due to increased competition.
Therefore, the condition the need to allow free trade goes against the concept of protecting infant industries and promoting their growth, making it incompatible with the infant industry argument and potentially conflicting with the objectives of developing countries seeking to protect their domestic industries through trade restrictions.
Question 2
The following are four conditions sometimes attached to IMF loans to low-income countries.
Which condition would conflict with the ‘infant industry’ argument?
Answer: A.
The correct answer is A: the need to allow free trade.
The infant industry argument holds that a newly established domestic industry cannot yet compete with established foreign producers, because it has not reached the scale at which unit costs fall or accumulated experience. Temporary protection, a tariff or quota, is said to shelter it until it can compete unaided. A loan condition requiring free trade removes exactly that protection, exposing the infant industry to full foreign competition before it has matured. The two positions are in direct conflict.
Why the other options are wrong:
The infant industry argument holds that a newly established domestic industry cannot yet compete with established foreign producers, because it has not reached the scale at which unit costs fall or accumulated experience. Temporary protection, a tariff or quota, is said to shelter it until it can compete unaided. A loan condition requiring free trade removes exactly that protection, exposing the infant industry to full foreign competition before it has matured. The two positions are in direct conflict.
Why the other options are wrong:
- B, controlling inflation, is compatible with protecting a young industry, and low inflation actually helps competitiveness. It concerns the price level, not trade barriers.
- C, contractionary fiscal policy, reduces government spending or raises taxes. It may squeeze demand generally and could reduce subsidies, but it does not address whether imports face barriers.
- D, privatisation, changes who owns firms. A privately owned infant industry can still be protected by tariffs, so ownership and protection are separate questions.
Question 3
A country decides to abolish its tariff on imports of copper from Zambia. Under which circumstances would this benefit Zambia?
Answer: B.
Abolishing the tariff lowers the price importers pay, so more copper is bought, and Zambia gains only if the extra volume raises its total export earnings rather than merely selling the same copper for less. Total revenue rises after a price fall when the proportionate increase in quantity demanded exceeds the proportionate fall in price, which is exactly what a price elasticity of demand greater than one means, so B is right. C is the opposite case: with inelastic demand the quantity bought barely responds, so the lower price cuts Zambia's earnings. A points at the wrong elasticity, since a tariff change alters the price buyers face, not their income, so income elasticity does not describe the response at all. D is about Zambia's own ability to ship more copper, and an inelastic supply would LIMIT how far it could take advantage of the opening, so it works against the gain rather than creating one.
Question 4
The African Union consists of 55 developing countries. They agree to adopt a free-trade model to boost trade between member countries.
In theory what do free-trade models tend to ignore?
Answer: D.
The theory of comparative advantage is built on opportunity cost ratios and assumes goods can move between countries costlessly. Real trade cannot: transport costs and inefficient handling can wipe out a modest cost advantage entirely, which matters especially between neighbouring developing economies with weak infrastructure. The other options describe what the model INCLUDES, absolute and comparative advantage, the international division of labour, so they cannot be what it ignores.
Question 5
What is the most likely consequence of an increase in the number of multinational companies?
Answer: C.
The correct answer is C: an increase in exports.
Multinational companies locate production in host countries partly to serve regional and global markets from a lower-cost base. Output produced in the host country and sold abroad is an export of that country, so export volumes rise. MNCs also bring distribution networks and brand recognition that domestic firms would take years to build, giving host-country production immediate access to foreign buyers.
Why the other options are wrong:
Multinational companies locate production in host countries partly to serve regional and global markets from a lower-cost base. Output produced in the host country and sold abroad is an export of that country, so export volumes rise. MNCs also bring distribution networks and brand recognition that domestic firms would take years to build, giving host-country production immediate access to foreign buyers.
Why the other options are wrong:
- A reverses a well-established benefit. MNCs are a major channel for technology transfer: they bring advanced capital equipment, management practices and training, which often spill over to local suppliers.
- B is self-contradictory. An increase in the number of MNCs is foreign direct investment, since setting up or acquiring production facilities abroad is what FDI means. More MNCs cannot mean less FDI.
- D is a possible drawback but not the most likely consequence. MNCs may out-compete domestic firms and cause job losses in those industries, and capital-intensive methods create fewer jobs than expected. But the direct effect of new production facilities is to employ workers, so the net effect on employment is normally positive.
What this practice covers
These questions are drawn from past CIE 9708 papers and filtered to globalisation. 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 globalisation, taken from our own topic notes. Read them before you practise and you will recognise the traps in the questions.
- Treating globalisation as uniformly good or bad rather than separating winners from losers.
- Forgetting profit repatriation and the GDP against GNI gap.
- Omitting effects on the home country entirely.
- Confusing FDI with aid, or with portfolio investment, which is the purchase of financial assets rather than productive capacity.
- Asserting a race to the bottom without acknowledging that many countries have raised standards while integrating.
- Ignoring the time asymmetry between concentrated adjustment costs and dispersed gains.
Revise it first
If any of the above is unfamiliar, work through the notes before practising: Globalisation revision notes.