OxfordAQA International AS and A-level Economics: Globalisation (9640) – 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 test globalisation in the OxfordAQA International AS and A-level Economics (9640) specification, version 1.2, section 3.4.1.1. Section 3.4 is extra International A2 content. Every country, firm and number is invented. New to the topic? Start with the revision notes or the study guide. The OxfordAQA Economics hub, the printable checklist and the free diagnostics are also useful. Currency units are written cu.

Questions

1. Explain what is meant by a global supply chain. [2]

2. Country P (illustrative) has these figures in billions of cu.

	Exports	Imports	GDP
Year 1	55	48	200
Year 9	80	76	240

(a) Calculate the openness ratio for Year 1. [1] (b) Calculate the openness ratio for Year 9. [1] (c) Comment on what the change shows about globalisation. [2]

3. Explain two causes of globalisation. [4]

4. Inward FDI into Country Q (illustrative) was 5.0, 6.5, 7.8 and 9.1 billion cu in Years 1 to 4.

(a) Calculate the index number for Year 4, with Year 1 = 100. [1] (b) Calculate the percentage change in FDI from Year 3 to Year 4. [2] (c) State the year-on-year change with the highest percentage growth. [1]

5. A TNC’s parent is in Country R (profit tax 25%). Its subsidiary is in Country S (profit tax 12%). The subsidiary makes a part at a cost of 30 cu and sells it to the parent. The parent sells the finished good for 120 cu and has other costs of 20 cu per unit.

(a) Calculate the total tax per unit if the transfer price is 50 cu. [2] (b) Calculate the total tax per unit if the transfer price is 80 cu. [2] (c) State the tax saved by choosing 80 cu. [1] (d) State the tax revenue per unit lost by Country R. [1]

6. Workers in an overseas plant earn 250 cu a month in Year 1 and 280 cu in Year 2. The consumer price index rises from 100 to 120.

(a) Convert the Year 2 wage into Year 1 prices. [2] (b) Find the percentage change in real pay between the two years. [1]

7. In Country T (illustrative), output rises from 200 to 260 units and emissions per unit fall from 0.80 to 0.60.

(a) Calculate total emissions in each year. [2] (b) Find the percentage change in total emissions. [1] (c) Explain what this shows about scale and technique effects. [1]

8. Explain how globalisation may widen income inequality within an LEDC. [6]

9. Explain how a TNC can exercise political influence over a host government, and one consequence. [4]

10. Evaluate whether an MEDC gains from globalisation. [9]

11. A TNC opens a plant in Country V, an LEDC (illustrative). It employs 600 workers at 320 cu a month, when the local average is 240 cu. It earns 20 million cu profit a year and sends 70% abroad. It buys most parts from other countries and is the largest employer in the region.

(a) Calculate the wage premium as a percentage of the local average, and the profit retained in Country V. [3] (b) Assess the costs and benefits to Country V of this TNC’s growth. [9]

Answers

1. A global supply chain is a production process split into stages [1]. Each stage is done in whichever country suits it, for example design in one, parts in another and assembly in a third, with the product then sold worldwide [1]. [2] Examiner insight: A definition scores when it names stages in more than one country. A bare “goods made abroad” is thin, so add the idea of linked stages.

2. (a) (55 + 48) / 200 × 100 = 51.5% [1]. [1] (b) (80 + 76) / 240 × 100 = 65% [1]. [1] (c) Openness rose by 13.5 percentage points [1]. Trade grew faster than GDP (about 51% against 20%), so the economy is more integrated with the world economy [1]. [2] Examiner insight: Say “percentage points” for the change between two ratios. Linking the figures to integration is what turns a calculation into a comment.

3. First cause: falling transport and communication costs [1] make it cheaper to ship goods and coordinate production across countries, so firms spread production [1]. Second cause: trade liberalisation [1] lowers tariffs and widens markets, so exports and foreign investment grow [1]. Other valid causes include free capital movement, emerging economies opening up and TNC strategy. [4] Examiner insight: Each cause needs a chain to globalisation. A list of causes with no link to more trade, investment or integration gains little.

4. (a) 9.1 / 5.0 × 100 = 182 [1]. [1] (b) (9.1 − 7.8) / 7.8 × 100 [1] = 16.7% [1]. [2] (c) Year 1 to Year 2 (30%, against 20% and 16.7%) [1]. [1] Examiner insight: Show the working in a percentage change, and use the earlier year as the base. A value measured against the later year gives a different, wrong figure.

5. (a) Subsidiary profit = 50 − 30 = 20, tax = 20 × 0.12 = 2.40. Parent profit = 120 − 50 − 20 = 50, tax = 50 × 0.25 = 12.50 [1]. Total = 14.90 cu [1]. [2] (b) Subsidiary profit = 80 − 30 = 50, tax = 6.00. Parent profit = 120 − 80 − 20 = 20, tax = 5.00 [1]. Total = 11.00 cu [1]. [2] (c) 14.90 − 11.00 = 3.90 cu per unit [1]. [1] (d) 12.50 − 5.00 = 7.50 cu [1]. [1] Examiner insight: Work out profit in each country before applying its own tax rate. Mixing the two rates on one profit figure is the usual slip.

6. (a) 280 / 120 × 100 [1] = 233.3 cu [1]. [2] (b) (233.3 − 250) / 250 × 100 = −6.7%, a fall [1]. [1] Examiner insight: A nominal rise of 12% looks like a gain. State the direction of the real change, and show the deflating step.

7. (a) Year 1: 200 × 0.80 = 160 [1]. Year 2: 260 × 0.60 = 156 [1]. [2] (b) (156 − 160) / 160 × 100 = −2.5% [1]. [1] (c) Output rose 30% (scale effect) but emissions per unit fell 25% (technique effect), and the technique effect was the larger, so total emissions fell [1]. [1] Examiner insight: Compare the two percentage changes, then link them to total emissions. Do not assume that scale always dominates.

8. A chain of reasoning is needed. Foreign firms and exporters demand skilled workers [1], so their wages rise faster than the wages of low-skilled workers [1], and the income gap widens [1]. Cheap imports and TNC competition may also close local firms and farms [1], so owners and workers in those sectors lose income [1], while owners of capital, land or TNC-linked firms gain, widening the gap further [1]. [6] Examiner insight: Name who gains and who loses, and link each to income. Saying “the rich get richer” without a mechanism gains little.

9. A large TNC may lobby for tax breaks or weaker regulation [1], since its investment and jobs give it bargaining power [1]. It can threaten to relocate if its demands are refused [1]. A consequence is that the host government gives up tax revenue or lowers labour and environmental standards [1]. [4] Examiner insight: Political influence needs both the means (lobbying, threat to leave) and the source of power (size and jobs). The consequence must be specific.

10. Gains: cheaper goods and inputs raise real incomes [1]; larger markets allow scale economies [1]; competition spurs innovation and efficiency [1]. Costs: imports and offshoring cause closures in some industries [1], and structural unemployment follows because skills do not match new jobs [1]; low-skilled wages come under pressure and inequality can widen [1]. Evaluation: the gain is spread widely but the loss falls on particular workers and regions [1]; the balance depends on retraining, labour mobility and the share of trade in the economy [1]. Judgement: an MEDC probably gains overall if the support for displaced workers is strong, but the net gain is smaller for those who lose their jobs [1]. [9] Examiner insight: An evaluate question needs a supported judgement. Compare the size of gains and losses, and say what the conclusion depends on.

11. (a) Premium = (320 − 240) / 240 × 100 [1] = 33.3% [1]. Retained = 30% × 20 = 6 million cu [1]. [3] (b) Benefits: 600 jobs paying 33% above the local average [1]; tax revenue and skills [1]; export earnings [1]. Costs: 14 million cu of profit leaves each year [1]; imported parts mean few links to local suppliers [1]; local rivals may be crowded out [1]; transfer pricing could reduce taxable profit [1]; as the largest employer, the TNC can seek tax breaks or weaker rules [1]. Judgement: the gain is real but limited, as 70% of profit leaves and local spending is small, so the government should raise the local share through tax, local content or standards [1]. [9] Examiner insight: Use the data, such as the wage premium, the share of profit leaving and the imported parts. The final judgement should say which side is larger and what would change it.

Where marks are usually lost

• Using “percent” where “percentage points” is needed for an openness change.
• Calculating a percentage change against the later value.
• Applying one tax rate to a group’s total profit instead of each country’s own profit.
• Quoting a nominal wage rise without deflating it.
• Assuming a lower emissions intensity means lower total emissions.
• Describing the effects on LEDCs or MEDCs as if every group gained or lost alike.
• Listing costs and benefits of TNCs with no judgement.
• Giving political influence as a vague “power” with no mechanism.
• Missing units, such as cu or percent, from a final answer.

Next steps

• Recall: revision notes.
• Learn: study guide.
• Track: course hub and checklist.
• Find gaps: all free 10-minute diagnostics.
• Book a free trial class: trial.

Official syllabus

OxfordAQA International AS and A-level Economics (9640), specification version 1.2, section 3.4.1.1 Globalisation. First teaching September 2020, first AS exams May/June 2021, first A-level exams May/June 2022.