Cambridge IGCSE · Business Studies (0450)

Business and the international economy: Practice Questions

5 multiple-choice questions marked as you go, and 4 written questions with worked solutions. All on Business and the international economy.

9 questions25 marksFree, no account

Question 1

1 mark

The government of Country Z wants to protect its infant industries from international competition. Which combination of policies would be most effective in achieving this goal?

Question 2

1 mark

A large Multinational Corporation (MNC) is considering moving its production facility from Country X to Country Y. Country Y has recently joined a major regional Trade Bloc.

What is the most likely strategic reason for this move?

Question 3

1 mark

A manufacturer in Country A imports 50% of its raw materials from Country B. The exchange rate changes from \( 1 \text{ unit of A} = 1.25 \text{ units of B} \) to \( 1 \text{ unit of A} = 1.50 \text{ units of B} \).

What is the most likely impact on the manufacturer's costs and its price competitiveness in Country B?

Question 4

1 mark

Global Dynamics is a Multinational Corporation (MNC) that has just opened a capital-intensive assembly plant in a developing country with high unemployment.

Which of the following is the most likely negative impact on the host country's economy?

Question 5

1 mark

An appliance retailer in Europe imports washing machines from South Korea. The Euro (\( € \)) has significantly depreciated against the South Korean Won (\( ₩ \)) over the last quarter.

If the retailer wants to maintain the same gross profit margin, what action must they take?

Question 6

3 marks

Define the term globalisation and state one reason why it has increased over the last few decades.

Write your answer out first, then check it against the worked solution.

Question 7

6 marks

Analyse the potential negative impact on a domestic economy when a large Multinational Company (MNC) decides to close its local operations and relocate to a lower-cost country.

Write your answer out first, then check it against the worked solution.

Question 8

3 marks

Identify two common methods of protectionism that a government might use to limit international trade.

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Question 9

8 marks

GlobalTech is a multinational corporation based in Country A. It exports 60% of its products to Country B. The current exchange rate is \( 1 \text{ Unit of Currency A} = 1.5 \text{ Units of Currency B} \).

(a) If Currency A appreciates by 20%, calculate the new exchange rate. [2]
(b) Explain how this appreciation will affect GlobalTech's competitiveness in Country B. [2]
(c) Evaluate whether GlobalTech should set up a factory in Country B to mitigate exchange rate risks. [4]

Write your answer out first, then check it against the worked solution.

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