OxfordAQA IGCSE Business: The economic climate on business and Globalisation (9225) – 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 sections 3.2.3 (The economic climate on business) and 3.2.4 (Globalisation) of the OxfordAQA International GCSE Business (9225) specification, version 3.1, for exams from May/June 2022 onwards. Learn the ideas first in the study guide and the revision notes. There is also an earlier mixed set, the Influences on business practice questions. Useful links: the course hub, the printable checklist and the free diagnostics. The leasing idea in question 5 is a general description of Sharia compliant finance, not a structure named in the specification. Currency amounts are in pounds; no exchange rate conversions are needed.

Questions

1. (a) Define the term “overdraft”. [2] (b) State one difference between an overdraft and a loan. [1]

2. Identify two forms of globalisation. [2]

3. Grayling Coaches runs minibus tours. It has a variable-rate bank loan of £90,000. The rate rises from 5.5% to 7%. Its profit before interest is £16,000 a year, and the loan is its only borrowing. (a) Calculate the increase in annual interest. [2] (b) Calculate the percentage fall in profit after interest, to one decimal place. [3]

4. Explain one way a rise in interest rates could reduce spending by households and one way it could reduce spending by businesses. [4]

5. The owner of Wolvesey Joinery avoids interest on religious grounds and needs a new machine. Explain how the owner could finance the machine without paying interest, and explain one way a rise in interest rates could still affect Wolvesey Joinery. [4]

6. Quillbrook Print Works makes wedding invitation packs and school exercise books. Job losses in the town lower household incomes. Monthly sales before and after are shown.

Invitation packs: 600 sold at £40, falling to 480 at £40. Exercise books: 2,000 sold at £6, falling to 1,920 at £6.

(a) Calculate the percentage fall in total monthly revenue, to one decimal place. [4] (b) Analyse why the fall in sales differs between the two products. [4]

7. Holmfirth Tech Repairs mends phones and laptops. Employment in its town rises sharply. Explain one benefit and one problem this may bring to the business. [4]

8. Thrushfield Orchards exports apple juice at a fixed price in its home currency. It sells 50,000 bottles a year overseas and makes a profit of £0.60 a bottle. The home currency strengthens, and overseas sales fall to 45,000 bottles. (a) Calculate the fall in profit from these exports. [2] (b) Explain why a stronger home currency can reduce export sales. [3]

9. Lyncombe Textiles imports cotton. After the home currency weakens, the cost of a roll rises from £80 to £92 in home currency. It sells 1,500 rolls a year at £120 a roll, printed in a catalogue that cannot change until next year. Ignore other costs. (a) Calculate the fall in total profit. [3] (b) The currency has moved sharply and unpredictably for three months. Analyse two problems this causes the business. [4]

10. Ambleby Foods is in a developing country. It makes tinned mango, has a relative cost advantage in fruit and labour, and sells to overseas supermarkets. A large multinational has started selling similar products in its home market. Analyse one benefit and one drawback of globalisation for Ambleby Foods, and one effect on the country’s economy. [6]

11. Oxbury Components, in a developed country, makes 200,000 units a year at £18 a unit, of which labour is £7. It is considering moving production to a developing country, where labour would be £2.50 a unit and transport would add £1.20 a unit. The move would cost £1.5 million to set up and would end 120 local jobs. (a) Calculate the annual saving from moving. [3] (b) Evaluate whether Oxbury Components should move production. [7]

Answers

1. (a) An arrangement with a bank that lets a business spend more than its account holds [1], up to an agreed limit, with interest charged on the amount overdrawn [1]. (b) A loan is a fixed sum repaid over an agreed time, while an overdraft is flexible and short-term [1]. [3] Examiner insight: A definition earns most when it contains both the idea of borrowing through the account and the idea of a limit or interest; “borrowing money” alone is too general.

2. Any two of: specialisation by country [1]; relative cost advantage [1]; movement of labour; larger markets; international competition. [2] Examiner insight: Use the wording of the five listed forms. A made-up form that sounds sensible may not be recognised.

3. (a) Before: 90,000 x 5.5% = £4,950 [1]. After: 90,000 x 7% = £6,300, so the increase is £1,350 [1]. (b) Profit after interest before = 16,000 - 4,950 = £11,050 [1]. After = 16,000 - 6,300 = £9,700 [1]. Fall = 1,350 / 11,050 x 100 = 12.2% [1]. [5] Examiner insight: Show each step. A common slip is dividing by £16,000 instead of by profit after interest, which gives 8.4% and is not the question asked.

4. Households: a rise in rates raises mortgage and credit repayments [1], leaving less income to spend [1]. Businesses: dearer borrowing makes firms delay buying machinery or vehicles [1], so firms that supply those goods sell less [1]. [4] Examiner insight: Each point needs a reason and a consequence. “People spend less” with no link to borrowing costs gains little.

5. Wolvesey could lease the machine: a financier buys it and leases it to the business for an agreed payment [1], so no interest is charged and the cost is not tied to the rate [1]. It could still be affected through customers: households with higher borrowing costs spend less on fitted joinery [1], so sales and profit could fall [1]. [4] Examiner insight: Naming the structure and then explaining how it avoids interest is better than the phrase “Islamic finance” alone. Remember the second part: the question asks about an effect that remains.

6. (a) Revenue before = 600 x 40 + 2,000 x 6 = 24,000 + 12,000 = £36,000 [1]. After: invitations 480 x 40 = £19,200 [1] and books 1,920 x 6 = £11,520 [1]; total £30,720. Fall = 5,280 / 36,000 x 100 = 14.7% [1]. (b) Invitation packs are a purchase households can postpone or scale down [1], so when incomes fall their sales drop sharply (by 20%) [1]. Exercise books are a necessity for school [1], so families keep buying and sales fall by only 4% [1]. [8] Examiner insight: Use the percentages given (20% and 4%) when you explain the difference; a general statement about luxuries with no figures reads as unsupported.

7. Benefit: more households have wages [1], so more spend on repairs or replacing devices [1]. Problem: it is harder to recruit technicians [1], and the shop may need to raise pay, which increases costs [1]. [4] Examiner insight: A benefit and a problem must both be developed. Two benefits, however well explained, do not answer the question.

8. (a) Before: 50,000 x 0.60 = £30,000. After: 45,000 x 0.60 = £27,000. Fall = £3,000 [2]. (b) The price paid by overseas buyers, in their own currency, rises [1], so the juice becomes dearer compared with local or rival products [1], so some buyers switch and fewer bottles are sold [1]. [5] Examiner insight: The key link is from the stronger currency to the overseas price; skipping it and writing “demand falls” is a common loss of credit.

9. (a) Profit per roll before = 120 - 80 = £40; after = 120 - 92 = £28 [1]. Fall per roll = £12 [1]. Total fall = 12 x 1,500 = £18,000 [1]. (b) First, costs are hard to predict [1], so the firm cannot be sure of its margin when it orders [1]. Second, the catalogue price cannot change this year [1], so each further rise in the cost of cotton comes straight out of profit [1]. [7] Examiner insight: Tie both problems to this firm (imported cotton, fixed catalogue) rather than listing general uncertainty.

10. Benefit: the relative cost advantage lets it win large overseas orders [1], so sales volume and profit can rise [1]. Drawback: the multinational competes in its home market with bigger resources [1], so it may lose share or have to cut price [1]. Economy: orders and investment create jobs and tax income [1], though profits made by the multinational may leave the country [1]. [6] Examiner insight: Label each part (benefit, drawback, economy) so that the three required elements are easy to find. A paragraph about “globalisation” in general loses the link to Ambleby Foods.

11. (a) New unit cost = 18 - 7 + 2.5 + 1.2 = £14.70 [1]. Saving per unit = £3.30 [1]. Annual saving = 3.30 x 200,000 = £660,000 [1]. (b) For: the relative cost advantage saves £660,000 a year [1], so the £1.5 million set-up cost is recovered in about 2.3 years [1]. The lower cost could allow lower prices or more profit [1]. Against: 120 local jobs would end, which may damage reputation and morale [1]; a long supply chain adds risk, and an exchange rate swing could cut the saving [1]. Judgement: the move seems justified if Oxbury can protect quality and expects to trade for several years [1], but it should [1] plan for currency movements, because the saving is large only while costs stay as given. [10] Examiner insight: An evaluation is stronger when the judgement follows from the figures and names a condition; an answer that lists pros and cons and stops will not show weighing.

Where marks are usually lost

• Naming an economic factor without explaining how it reaches cost, price, sales or profit.
• Giving one channel for interest rates and ignoring customers’ spending.
• Dividing by the wrong base when finding a percentage fall.
• Getting exporter and importer the wrong way round for a currency movement.
• Writing about the economy when the question asks about the business.
• Offering a general judgement that is not linked to the figures or the case.
• Treating Sharia compliant finance as having no payments at all.

Frequently asked questions

How should you use the figures in an evaluation answer? Link your judgement to the figures and facts in the case rather than offering a general view. A judgement that could be pasted onto any other business has not used the case.

What is the most common slip in percentage fall calculations? Dividing by the wrong base. A percentage fall is the change divided by the original figure, multiplied by 100.

Which part of OxfordAQA IGCSE Business 9225 do these questions cover? They cover sections 3.2.3 The economic climate on business and 3.2.4 Globalisation of OxfordAQA International GCSE Business (9225).

Next steps

• Re-read the revision notes and the study guide.
• Tick off the topics on the printable checklist.
• Go to the course hub.
• Take one of the free 10-minute diagnostics.
• Book a free trial class.

Official syllabus

OxfordAQA International GCSE Business (9225), specification version 3.1, for International GCSE exams from May/June 2022 onwards, published by OxfordAQA. Sections 3.2.3 and 3.2.4.