plan a response for the essay questions below (make sure your 25 mark plans include: The main
points, application you would use, diagrams you would use, supporting points + application,
evaluations + app and what your decision would be + recommendation) – I will be collecting these
in!
1. The trade-weighted exchange rate of the US dollar appreciated by over 20 percentage
points between January 2013 and January 2016.
(a) Assess the possible causes of this increase in the exchange rate of the US dollar. (15)
(b) Evaluate the possible economic effects of the appreciation of the US dollar. (25)
2. UK productivity, as measured by output per worker, was 25 percentage points below the
average for the rest of the major G7 economies in 2012, the widest gap since 1992.
(a) Assess the view that productivity is the most significant factor influencing the
international competitiveness of an economy’s goods and services. (15) (b) Evaluate the
impact of a fall in productivity on an economy. Refer to a country of your choice (25)
3. In Nigeria, a 70% tariff has been applied to imports of fully assembled motor vehicles. In
addition, increased tariffs of between 20% and 100% have been applied on certain
agricultural goods, such as wheat and rice.
(a) Assess the possible reasons why a country might impose tariffs on imports. (15)
(b) Apart from increasing trade barriers, assess factors which might explain changes in a
country’s pattern of trade with other countries. Refer to the principle of comparative
advantage in your answer and refer to a country of your choice. (25)
1. (a) Asses the possible causes of this increase in the exchange rate of the US dollar.
(15)
High Interest rates
- (AN) High IR would incentivise foreign investors to store their money in
US banks as they can receive higher returns for their savings and
therefore this would strengthen the currency as more people are
demanding it.
- (EV) However, interest rates are relative to international ones so even if
the Fed decided so increase IR in the US – if they are not high rates
compared to the rest of the world it is unlikely that they will see their
currency strengthen as investors will choose other countries to store their
money.
- (APP) The idea of relative IR was seen in the early 2000s when despite the
UK and US’s normally high interest rates – Iceland and Ireland were
attracting much greater levels of foreign investment because their
interest rates were extortionate.
High levels of Exports
- (AN) higher levels of US Dollars will be demanded in order to buy US
exports – this increased demand will subsequently strengthen the US
currency.
- (APP) this has been seen with China who had to devalue their currency
manually because it had strengthened so much due to their high levels of
exports
points, application you would use, diagrams you would use, supporting points + application,
evaluations + app and what your decision would be + recommendation) – I will be collecting these
in!
1. The trade-weighted exchange rate of the US dollar appreciated by over 20 percentage
points between January 2013 and January 2016.
(a) Assess the possible causes of this increase in the exchange rate of the US dollar. (15)
(b) Evaluate the possible economic effects of the appreciation of the US dollar. (25)
2. UK productivity, as measured by output per worker, was 25 percentage points below the
average for the rest of the major G7 economies in 2012, the widest gap since 1992.
(a) Assess the view that productivity is the most significant factor influencing the
international competitiveness of an economy’s goods and services. (15) (b) Evaluate the
impact of a fall in productivity on an economy. Refer to a country of your choice (25)
3. In Nigeria, a 70% tariff has been applied to imports of fully assembled motor vehicles. In
addition, increased tariffs of between 20% and 100% have been applied on certain
agricultural goods, such as wheat and rice.
(a) Assess the possible reasons why a country might impose tariffs on imports. (15)
(b) Apart from increasing trade barriers, assess factors which might explain changes in a
country’s pattern of trade with other countries. Refer to the principle of comparative
advantage in your answer and refer to a country of your choice. (25)
1. (a) Asses the possible causes of this increase in the exchange rate of the US dollar.
(15)
High Interest rates
- (AN) High IR would incentivise foreign investors to store their money in
US banks as they can receive higher returns for their savings and
therefore this would strengthen the currency as more people are
demanding it.
- (EV) However, interest rates are relative to international ones so even if
the Fed decided so increase IR in the US – if they are not high rates
compared to the rest of the world it is unlikely that they will see their
currency strengthen as investors will choose other countries to store their
money.
- (APP) The idea of relative IR was seen in the early 2000s when despite the
UK and US’s normally high interest rates – Iceland and Ireland were
attracting much greater levels of foreign investment because their
interest rates were extortionate.
High levels of Exports
- (AN) higher levels of US Dollars will be demanded in order to buy US
exports – this increased demand will subsequently strengthen the US
currency.
- (APP) this has been seen with China who had to devalue their currency
manually because it had strengthened so much due to their high levels of
exports
