Cambridge O Level Pakistan Studies: Trade — Practice Questions

These are original practice questions written in the style of Cambridge O Level Pakistan Studies (2059) assessment objectives. They are not taken from any past paper and are not endorsed by Cambridge International.

Related: Trade study guide and revision notes

These are two Paper 2 style questions on Section 6 Trade, each worth 25 marks in parts (a) to (d). Question 1 tests reading export and import data and the meaning of GDP, GNP and the balance of trade; Question 2 tests trading partners, blocs, barriers and exchange rates. All figures in the resources are illustrative and rounded, not official statistics.

Question 1: Exports, imports and the balance of trade

Fig. 1.1 (illustrative): value of Pakistan’s goods trade, US$ billion.

Year	Exports	Imports
Year A	24	46
Year B	25	56
Year C	32	80
Year D	28	55
Year E	31	55

Fig. 1.2 (illustrative): share of exports by group in Year E — textile group 55%, food group (mainly rice) 19%, other manufactures (surgical, sports goods, leather, chemicals, cement) 19%, other 7%.

(a) (i) Using Fig. 1.1, calculate the balance of trade in Year C. [1]

(ii) Using Fig. 1.2, state the share of exports not from the textile group. [1]

(iii) Using Fig. 1.1, describe the changes in imports from Year A to Year E. [3]

(b) (i) Define gross domestic product (GDP). [1]

(ii) Explain the difference between GDP and GNP. [3]

(c) Suggest two reasons why imports fell between Year C and Year D. [4]

(d) Explain how a continuing trade deficit affects Pakistan’s economy and development, and evaluate two ways of reducing it. [12]

Question 2: Partners and the conditions of trade

Fig. 2.1 (illustrative): Pakistan’s five largest export markets in a recent year — United States 18%, China 8%, United Kingdom 7%, United Arab Emirates 6%, Germany 6%; all others 55%.

(a) (i) Using Fig. 2.1, name the largest export market. [1]

(ii) Name two goods Pakistan exports to the market you named in (i). [2]

(iii) Name the country from which Pakistan buys most of its palm oil. [1]

(b) Explain what is meant by a trading bloc and give one example of a trading arrangement that includes Pakistan. [3]

(c) (i) Explain how the EU’s GSP+ scheme helps Pakistani exporters. [3]

(ii) Explain how a fall in the value of the rupee affects Pakistan’s exports and imports. [4]

(d) “It is very difficult for a developing country such as Pakistan to increase its share of world trade.” How far do you agree? Give reasons for your answer. [11]

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Mark scheme: Question 1

(a) (i) A deficit of US$48 billion (32 − 80) [1]. Must indicate deficit or show a minus sign.

(ii) 45% [1].

(iii) Any three: imports rose overall from US$46 billion to US$55 billion [1]; they rose steeply to a peak of US$80 billion in Year C [1]; then fell sharply to US$55 billion in Year D [1]; and stayed at US$55 billion in Year E [1].

(b) (i) The total value of goods and services produced within a country in a year [1].

(ii) GDP counts output produced inside Pakistan regardless of who owns it [1]; GNP counts output by Pakistan’s residents and firms wherever they are [1]; so GNP = GDP plus income earned abroad by Pakistanis minus income paid to foreign owners in Pakistan [1].

(c) Two reasons, each developed for 2 marks: world oil and gas prices fell, cutting the fuel import bill [2]; the government restricted imports, for example limits on letters of credit, to protect foreign-exchange reserves [2]; a sharp fall in the rupee made imports more expensive, so fewer were bought [2]; slower economic growth reduced demand for machinery and raw materials [2].

(d) Levels: Level 3 (9–12) explains effects and evaluates two methods with a judgement; Level 2 (5–8); Level 1 (1–4).

Effects: reserves fall; borrowing from the IMF and other lenders rises; debt repayments take money from schools, hospitals and infrastructure; the rupee weakens, raising fuel and food prices; industry cannot import machinery and inputs, slowing growth and jobs.

Ways to reduce it, with evaluation:

• Raise value-added exports (garments rather than yarn; branded sports goods): earns more per unit, but needs investment, skills and cheaper energy, and takes years.
• Diversify exports (IT services, surgical instruments, seafood, fruit): less reliance on textiles, but quality standards abroad are strict.
• Cut fuel imports by using Thar coal, hydel and solar: reduces the biggest import, but large projects are slow and costly.
• Restrict imports with tariffs: quick, but raises costs for exporters who rely on imported inputs and can breach trade agreements.

A Level 3 judgement explains which method is most sustainable, for example that diversifying and adding value tackle the cause, while restrictions only treat the symptom.

Mark scheme: Question 2

(a) (i) United States [1].

(ii) Any two of bed linen, towels, knitwear, ready-made garments, denim, leather goods, surgical instruments [2].

(iii) Indonesia (accept Malaysia) [1].

(b) A group of countries that agree to reduce or remove barriers such as tariffs on trade between them [2]; example: SAFTA, ECO, or the China–Pakistan Free Trade Agreement as a bilateral arrangement [1].

(c) (i) It removes or cuts EU tariffs on most Pakistani goods [1], so they are cheaper for EU buyers than goods from non-qualifying countries [1], which has helped textile and leather exports grow [1]. Credit: access is conditional on human-rights and labour standards [1]. Maximum 3.

(ii) Exports become cheaper in foreign currency, so demand may rise [1] and exporters earn more rupees per dollar [1]; imports become more expensive in rupees [1], so fuel, machinery and inputs cost more, raising inflation and exporters’ own costs [1].

(d) Levels: Level 3 (8–11); Level 2 (4–7); Level 1 (1–3).

Agree: narrow export base in textiles and rice; strong competitors (Bangladesh, Vietnam, India); tariffs, quotas and quality standards in richer markets; high energy costs; small firms lacking technology and branding; political tension limiting regional trade; Pakistan’s share of world exports has stayed well below one per cent.

Disagree, or partly: GSP+ and the China FTA give preferential access; location near the Gulf and on CPEC routes; a young workforce and growing IT services; record rice exports show sales can rise when conditions allow. A balanced judgement, for example “difficult but possible if Pakistan diversifies and cuts production costs”, reaches Level 3.

Frequently asked questions

How do I show a deficit in a calculation answer? Write it as a negative number or use the word “deficit”, and always include the unit, for example “a deficit of US$48 billion”.

What counts as a developed point in a 2-mark “suggest” answer? A reason plus its effect, for example “oil prices fell, so the same volume of fuel cost less to import”.

Can I use real figures I remember in a data question? Use the resource first. A remembered figure can support a point in part (d), but always date it and mark it as approximate.