AQA A-level Economics: Globalisation and multinational corporations (7136) – Practice Questions

These are original questions written for Marlbridge, for revision and practice on this content. They are not reproduced past-paper questions, and they do not replicate the exam’s exact structure, question count or mark tariffs – examination boards hold copyright in their own papers. Use these alongside the official past papers from your board or school.

These questions cover “Globalisation” in the AQA A-level Economics (7136) specification, version 1.3, numbered 3.2.6.1 on the AQA website (4.2.6.1 in the combined PDF). Every country, firm and figure here is made up. Read the study guide and the revision notes first. The course hub, checklist and diagnostics are linked below too.

Questions

1. Define globalisation. [2]

2. Explain how lower transport costs and developments in information technology have contributed to globalisation. [4]

3. Between year 0 and year 12 in Country A, an index of the volume of trade rises from 100 to 156 and an index of real output rises from 100 to 126.

(a) Calculate the average annual rate of growth of trade volume, to one decimal place. [2] (b) Calculate trade volume relative to output in year 12 (year 0 = 100). [2]

4. Country J imports parts worth 36 and exports the assembled product for 45.

(a) Calculate the value added in Country J as a share of the export value. [2] (b) Explain why gross export figures can overstate the benefit a country gets from taking part in a supply chain. [3]

5. The table shows data for Country K.

	Year 1	Year 10
Exports plus imports as % of GDP	38	47
FDI inflow as % of GDP	2.0	3.5
Foreign-owned firms’ share of manufacturing output (%)	18	31
Average tariff (%)	14	6

Identify two characteristics of globalisation shown in the data, and explain one limitation of the data in judging who gains. [4]

6. In Country L, imported electronics make up 10% of household spending and their price falls by 30%. Other prices are unchanged. Calculate the new price level (old = 1.00) and the change in the real purchasing power of a fixed money income. [3]

7. Country M has GDP of 450. Foreign MNCs send profits of 36 abroad. Residents earn 9 from abroad.

(a) Calculate gross national income (GNI). [2] (b) Explain why GNI may be a better guide than GDP to the living standards of residents in Country M. [2]

8. Explain two ways in which globalisation may benefit a less-developed country and one way in which it may harm it. [6]

9. An MNC has subsidiary P in a country taxing profit at 35% and subsidiary R in a country taxing profit at 15%. P earns 80 and R earns 20 before tax. Using transfer prices, the MNC shifts 30 of profit from P to R.

(a) Calculate the tax the MNC saves. [3] (b) Explain why the government where P operates may be concerned. [2]

10. An MNC opens a plant in Country N with 1,500 direct jobs. Each direct job supports 0.8 further jobs locally. Direct workers earn 6,000 a year.

(a) Calculate the total number of jobs supported. [2] (b) Calculate the annual wage bill for the direct jobs. [1] (c) Explain one reason why the net gain in employment may be smaller than your answer to (a). [1]

11. Assess whether globalisation harms workers in more-developed countries. [6]

12. Evaluate the extent to which multinational corporations promote economic development in less-developed countries. [9]

Answers

1. The growing integration of national economies [1] as goods, services, capital, labour, technology or ideas cross borders [1]. [2] Examiner insight: Name both the closer linking and at least one type of flow; “trading more” alone covers only one part of the process.

2. Transport: lower costs cut the delivered price of goods [1], so trade rises and production can be split across countries [1]. Information technology: services can be traded and plants managed from a distance [1], so firms can build longer supply chains [1]. [4] Examiner insight: Each factor needs its own chain from cause to effect; naming two factors with no link to globalisation leaves the explanation incomplete.

3. (a) Growth = (156/100)^(1/12) - 1 [1] = 3.8% a year [1]. [2] (b) 156/126 x 100 [1] = 123.8, so trade has grown about 24% more than output [1]. [2] Examiner insight: Use the 12th root and show the formula line; dividing the total rise by 12 gives a different (simple) figure.

4. (a) Value added = 45 - 36 = 9 [1]. Share = 9/45 = 20% [1]. [2] (b) Exports record 45 although 36 is imported content [1]. Inputs are counted again each time they cross a border [1]. The country’s own income comes from value added of only 9, so its gain is smaller than the gross figure implies [1]. [3] Examiner insight: Use the numbers from the question in part (b); a general statement about supply chains reads as less applied.

5. Trade rising relative to output (38% to 47% of GDP) [1]. More FDI and a larger MNC role (inflow 2.0% to 3.5% of GDP, foreign share of manufacturing 18% to 31%) [1]. Limitation: the data show integration but not distribution [1], such as whether gains reach poorer households or whether profits leave the country [1]. [4] Examiner insight: The tariff row is a cause of globalisation rather than a characteristic, so it does not answer the first part of the question.

6. New price level = 0.90 + 0.10 x 0.70 = 0.97 [1], a fall of 3.0% [1]. Purchasing power = 1/0.97 - 1 = +3.1% [1]. [3] Examiner insight: Weight the price fall by the budget share; applying the whole 30% to the price level overstates the gain.

7. (a) Net income from abroad = 9 - 36 = -27 [1]. GNI = 450 - 27 = 423 [1]. [2] (b) GNI measures income of residents [1], whereas GDP includes profit that is sent abroad and not available to residents [1]. [2] Examiner insight: Make clear that GDP measures output inside the borders and GNI measures income of residents; the two are often swapped.

8. Benefit one: FDI brings capital, jobs and technology [1] that raise output and incomes [1]. Benefit two: access to export markets allows specialisation and growth [1], with more foreign exchange and tax revenue [1]. Harm: reliance on a few exports leaves the country open to falling world prices [1], which can cut incomes and government revenue (or local firms may be undercut by imports) [1]. [6] Examiner insight: Giving two benefits and one harm exactly as asked is safer than a long list; extra points do not replace a missing development of one chain.

9. (a) Tax before = 0.35 x 80 + 0.15 x 20 = 28 + 3 = 31 [1]. After: P = 50 and R = 50, so 17.5 + 7.5 = 25 [1]. Saving = 6 [1]. [3] (b) The P government loses 10.5 of tax (28 - 17.5) [1], though the real activity occurs in its economy, so it has less to spend on public services [1]. [2] Examiner insight: Show the before and after tax lines separately; the saving can then be traced to the shifted profit.

10. (a) Indirect jobs = 1,500 x 0.8 = 1,200 [1]. Total = 2,700 [1]. [2] (b) 1,500 x 6,000 = 9,000,000 [1]. [1] (c) Some jobs may replace jobs lost at local firms driven out by the MNC (or workers may move from other jobs) [1]. [1] Examiner insight: A reason for a smaller net gain must be a specific effect, such as crowding out, and not just “some people might not work”.

11. Harm: offshoring and import competition remove jobs in some industries [1], leading to structural unemployment, especially where workers’ skills do not match new jobs [1]. Lower-skilled wages may fall relative to skilled wages, widening inequality [1]. Benefits: cheaper imports raise real income [1] and exports and service sectors create new jobs [1]. Judgement: the outcome depends on the speed of adjustment and on retraining and mobility, so the harm is concentrated and may be temporary for some workers but lasting for others [1]. [6] Examiner insight: A supported judgement that says who is harmed and under what conditions is stronger than a verdict of “harms” or “benefits” alone.

12. Benefits: MNCs bring capital and technology [1], create jobs and wages above local alternatives [1], and raise tax revenue and export earnings [1]. Costs: profit sent home means GNI grows more slowly than GDP [1]. Local firms may lose sales and close [1], and transfer pricing can cut the tax the host receives [1]. Evaluation: the effect depends on the type of investment, as manufacturing with local suppliers links more with the economy than extraction does [1]. It depends on the host’s skills, bargaining power, tax and regulation [1]. Development also needs health, education and institutions, so an MNC is one input only [1]. [9] Examiner insight: Development is wider than growth, so an answer that discusses only output and jobs leaves evaluation material unused.

Where marks are usually lost

• Giving a definition of globalisation that covers only trade.
• Writing “lower costs lead to globalisation” without the chain that links the cost to trade or investment.
• Using a simple average instead of a compound rate for growth over several years.
• Confusing GDP with GNI, or ignoring profit sent abroad.
• Treating all jobs created by an MNC as net new jobs.
• Applying a price fall to the whole price level instead of weighting it by the budget share.
• Describing benefits and costs without saying who gains, who loses and over what period.
• Ending an evaluation with a summary of points and no judgement.

Next steps

• Revisit the study guide for any chain you could not write from memory.
• Condense it with the revision notes.
• Tick off the topic on the printable checklist and browse the course hub.
• Take the free 10-minute diagnostics.
• Book a free trial class.

Official syllabus

AQA, AS and A-level Economics specification (7135 and 7136), version 1.3, 29 June 2022, for first teaching from September 2015. Section 4.2.6.1 Globalisation (site-map number 3.2.6.1).