Cambridge IGCSE Commerce: Globalisation of Trade — Practice Questions (0715)

These are original questions written for Marlbridge, in the style and at the standard of the examination. They are not reproduced past-paper questions — Cambridge International holds copyright in its own papers. Use these alongside the official past papers available free from your board.

Related: Globalisation of Trade study guide and revision notes

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Section A

1. State the key difference between the Balance of Trade and the Balance of Payments. [2]

2. Name the three types of trade restriction covered in this topic. [3]

3. State one benefit of international trade to a country. [1]

Section B

4. A country’s exports of goods in a given year total $80 million, and its imports of goods total $95 million.

(a) Calculate the country’s Balance of Trade for the year, and state whether it represents a surplus or a deficit. [2] (b) Explain one possible consequence for the country of running this result over several consecutive years. [3]

5. A country joins a trading bloc with several neighbouring countries.

(a) State one advantage and one disadvantage of joining the trading bloc. [2] (b) A country outside the bloc wants to sell goods to bloc members. Explain one trade restriction it might face that a bloc member would not. [3]

6. A furniture manufacturer sources raw wood from a supplier, converts it into furniture, and sells directly to consumers through its own stores.

(a) State whether this is a simple or complex supply chain, and justify your answer. [2] (b) Identify which part of this supply chain is “upstream” and which is “downstream.” [2]

7. A global supply chain is disrupted when a key supplier’s factory is damaged by a flood.

(a) Identify the category of supply chain risk this represents. [1] (b) Suggest one action a business could take in advance to reduce the impact of this type of risk. [3]

8. A small exporting business is worried about the cost and risk of trading with a distant overseas buyer for the first time. Name one source of support available to exporters, and explain how it could help. [3]

9. Explain one challenge faced by an importer trading internationally, other than cost of transport. [3]

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Answers

1. The Balance of Trade covers only the value of a country’s exports and imports of goods [1], while the Balance of Payments is the wider record covering trade in both goods and services, plus financial flows [1].

2. Tariffs, quotas, embargoes [3].

3. Any one of: wider choice of goods, higher standard of living, lower cost of imports, more investment, creation of jobs [1].

4. (a) Balance of Trade = exports − imports = $80m − $95m = −$15 million, a deficit [2]. (b) A persistent deficit could mean the country is spending more on imports than it earns from exports over time, which may need to be financed through borrowing, reduce foreign currency reserves, or put downward pressure on the value of its currency, potentially affecting the country’s wider economic stability [2–3].

5. (a) Advantage: easier access to member markets, often without tariffs within the bloc [1]. Disadvantage: loss of some independent trade policy, and exposure to the wider bloc’s economic problems [1]. (b) The country outside the bloc might face a tariff imposed on its goods when selling to bloc members [1–2], raising the price of its goods to consumers in the bloc and making them less competitive compared with goods traded tariff-free between bloc members themselves [1].

6. (a) This is a simple supply chain [1], because there is only one intermediary step (manufacturer) between the supplier and the consumer, with no separate agent, wholesaler or retailer involved [1]. (b) Upstream: sourcing raw wood from the supplier [1]. Downstream: selling the finished furniture to consumers through the manufacturer’s own stores [1].

7. This represents a natural disaster risk [1]. (b) The business could identify and build relationships with alternative suppliers in different locations in advance, so that production can continue, or be resumed more quickly, if one supplier is disrupted [2–3]. (Holding additional safety stock, correctly explained, would also gain credit.)

8. International trade fairs, cheaper bank loans (specifically for exporters), or insurance guarantees are named sources of support [1]. For example, an insurance guarantee could protect the exporting business against the risk of non-payment by the overseas buyer, reducing the financial risk of trading with an unfamiliar customer for the first time [2].

9. Any one, correctly explained: different currencies and foreign exchange rate fluctuations could change the actual cost of a transaction between the time it is agreed and the time payment is made [1–2]; different legal systems between the importer’s and exporter’s countries could make resolving a dispute more complicated than a purely domestic transaction [1]; or documentation and customs duties could add cost, delay and administrative complexity compared with a domestic purchase [1–2].

A note on exam technique for this topic

Question 4 illustrates the calculation skill the study guide flags as the most heavily tested numerical content in this topic: correctly identifying whether a result is a surplus or a deficit, and then explaining a genuine consequence of that result, rather than stopping at the calculation alone. Question 6 illustrates the upstream/enterprise/downstream structure the study guide recommends for any “describe the supply chain” question — using this named structure explicitly, rather than describing the supply chain in free-form prose, is what distinguishes a strong answer on 3.2 from a vague one.