OCR GCSE Economics: Why countries trade, trade agreements and the current account (J205) – 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 OCR GCSE (9-1) Economics (J205), Version 2.0 (June 2026), sections 4.1 and 4.2: why countries trade, free trade agreements including the EU, and the balance of payments on current account. All countries, firms and figures are invented. Read the study guide first, or the revision notes. Course page: OCR GCSE Economics. Printable checklist.

Questions

1. Explain the meaning of a deficit on the current account. [2]

2. Country C’s current account for one year, in CU billion: goods exports 84, goods imports 96; services exports 51, services imports 38; primary income received 30, paid 22; secondary income received 6, paid 14. Calculate the balance on current account and say whether the result is a surplus or a deficit. [4]

3. Explain two reasons why a country might import goods. [4]

4. Explain what a free trade agreement is and one benefit it could bring to a producer. [3]

5. Country D’s exports were CU 80 billion in year 1 and CU 92 billion in year 2. Imports were CU 90 billion and CU 99 billion.

(a) Calculate the percentage change in exports. [2] (b) Calculate the balance in each year and state what happened to the deficit. [2]

6. Explain one way in which the European Union differs from a basic free trade agreement. [4]

7. An imported bicycle sells for CU 220, including a 10% tariff. A trade agreement removes the tariff.

(a) Calculate the percentage fall in the price, to one decimal place. [3] (b) Explain one reason why domestic bicycle makers might be worse off. [2]

8. Country G’s exports and imports of goods and services (CU billion):

Year	1	2	3	4	5	6
Exports	200	210	225	228	240	236
Imports	230	245	250	236	238	252

(a) Calculate the balance in year 5 and in year 6. [2] (b) Analyse the change in exports and imports between year 1 and year 6. [4]

9. Analyse how rapid growth in household spending could lead to a current account deficit. [4]

10. Evaluate the importance of the current account to the UK economy. [8]

11. “A high level of consumer spending is the main cause of a current account deficit.” Evaluate this statement. [8]

Answers

1. Debits (money flowing out) exceed credits (money flowing in) [1] across trade, income and transfers, so the balance is negative [1]. [2] Examiner insight: A definition that mentions only goods describes the balance of trade, so state that income and transfers are included too.

2. Goods 84 - 96 = -12 [1]. Services 51 - 38 = +13 [1]. Primary 30 - 22 = +8 and secondary 6 - 14 = -8 [1]. Total -12 + 13 + 8 - 8 = +1, a surplus of CU 1 billion [1]. [4] Examiner insight: Show each part separately, because working that can be followed is easier to reward; a wrong total with visible working is easier to credit than a bare answer, and the words “surplus” and the unit belong in the final line.

3. Lacks resources or the climate to produce a good [1], so importing is the only way to obtain it [1]. Overseas producers may be cheaper [1], so consumers and firms pay less than for home-made goods [1]. (Other valid reasons: variety, inputs for firms.) [4] Examiner insight: Each reason needs a developed consequence; two bare labels such as “price” and “choice” are usually thin for four marks.

4. A deal between countries to remove or reduce barriers such as tariffs on trade between them [1]. Producers gain access to a bigger market without tariffs [1], so they can sell more and earn more revenue [1]. [3] Examiner insight: Say that barriers are reduced between members, not abolished everywhere, and name the kind of barrier such as a tariff or quota, so that the definition is precise.

5. (a) (92 - 80) = 12 [1]; 12 / 80 x 100 = 15% [1]. (b) Year 1: 80 - 90 = -10; year 2: 92 - 99 = -7 [1]. The deficit narrowed from CU 10 billion to CU 7 billion [1]. [4] Examiner insight: Dividing by the new figure is a common slip: the starting value is the base, so check which year you are dividing by before you write the percentage.

6. The EU has a customs union, with a common tariff on imports from outside [1], whereas members of a basic agreement set their own tariffs on outsiders [1]. The EU also has a single market [1] where goods, services, capital and people move with few barriers, so integration is deeper [1]. [4] Examiner insight: A comparison needs both sides stated; describing the EU alone leaves the “difference” unproved.

7. (a) Pre-tariff price = 220 / 1.1 = 200 [1], so the fall is 20 [1]; 20 / 220 x 100 = 9.1% [1]. (b) Cheaper imports compete directly with home-made bicycles [1], so makers may sell less or cut jobs [1]. [5] Examiner insight: Using 200 as the base gives 10%, which answers a different question; the price before the change, 220, is the starting value.

8. (a) Year 5: 240 - 238 = +2 [1]; year 6: 236 - 252 = -16 [1]. (b) Exports rose from 200 to 236, a rise of 18% [1]. Imports rose from 230 to 252, a rise of 9.6% [1]. Exports grew faster [1], so the deficit narrowed from 30 to 16, though it moved back into deficit in year 6 after a surplus in year 5 [1]. [6] Examiner insight: Analysis tends to improve when figures from the table are quoted and a change is calculated rather than described in words alone.

9. Faster spending raises demand for goods [1], including imports [1]. Imports (debits) may grow faster than exports [1], so debits exceed credits and the account moves towards deficit [1]. [4] Examiner insight: Chains that link each step with “so” or “which means” show analysis; a list of effects shows less.

10. For: the UK trades heavily, so exports support jobs and income [1]. A persistent deficit must be financed by borrowing or selling assets [1], adding to what is owed abroad [1], and may put pressure on the currency [1]. Against: a deficit can reflect imports of machinery that raise future output [1], and size matters, since a small share of GDP is easier to finance [1]. Other objectives, such as unemployment or inflation, may be more pressing in some years [1]. Judgement: the current account matters most when the deficit is large, lasting and due to weak competitiveness, so it is important but not always the first priority [1]. [8] Examiner insight: A reasoned final judgement that refers back to size, cause or duration tends to separate stronger answers from lists of points.

11. For: higher spending raises imports [1], and if firms cannot supply it at home, a deficit follows [1]. Against: a strong exchange rate makes exports dearer and imports cheaper [1], low productivity makes exports uncompetitive [1], and weak growth abroad cuts demand for exports [1]. Spending on imported machinery may be investment, not consumption [1]. Judgement: spending is often a major factor, but the main cause depends on the economy; where exports are uncompetitive, competitiveness matters more [1]. Support for the judgement with evidence, for example the size of each cause in the data [1]. [8] Examiner insight: Take a position on the word “main” and justify it; answers that list causes without ranking them leave the question unanswered.

Where marks are usually lost

• Giving the balance of trade when the current account is asked for.
• Leaving out the sign, the word “surplus” or “deficit”, or the unit.
• Using the new value as the base in a percentage change.
• Listing reasons without developing each with a consequence.
• Describing the EU as only a free trade area.
• Writing “deficits are bad” with no mention of size, cause or time.
• Quoting a table without calculating anything when asked to analyse.
• Finishing an evaluation without a judgement.
• Mixing up credits and debits, so that a deficit is reported as a surplus.
• Treating a one-year change as proof of a lasting trend.

Next steps

• Review the revision notes and the study guide.
• Go to the OCR GCSE Economics course page and tick off the checklist.
• Try the free 10-minute diagnostics.
• Book a free trial class at /trial/.

Official syllabus

OCR, Cambridge OCR Level 1/Level 2 GCSE (9-1) in Economics (J205), Version 2.0 (June 2026), first assessment 2019, sections 4.1 and 4.2.