IB Econ Study Guide Internationals - Sunny Hills High School

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lB Questions: Section 4 continued
7b Do floating exchange rates accurately reflect the relative
values of a countryS goods and services? (15 marks)
HL Short Essays
1 Outline the principle of comparative advantage. Does it
explain modern international trade?
2 A country wishes to improve its comparative advantage
in producing manufactured goods. What does this mean
and how might it be achieved?
3 Explain two benefits which might arise from
international trade.
4 Using an appropriate diagram explain who gains and
who loses from the introduction of a tariff.
5 What is a Voluntary Export Restraint (VER) and who is
likely ro benefit from it?
6 What are the main features of a Free Trade Area?
7 Explain why a current account balance of payments
deficit may or may not be a problem.
8 Explain how in theory balance of payments deficits and
surpluses on current account are automatically adjusted
under a system of flexible exchange rates. lllustrate your
answer using demand and supply analysis.
9 For what reasons might a country's exchange rate rise?
10 Using supply and demand curves explain how a
government might try to keep the exchange rate ot a
currency at an artificially high level.
'11 A firm is trying to sell in export markets. What factors
can influence its competitiveness?
12 Explain the effect of inflation on a country's international
compelrt|veness.
13 Why might a country's current account balance worsen
as it approaches full employmenl?
14 What impact is a substantial rise in the level of interest
rates in a country likely to have on its balance of
payments?
Distinguish carefully what is measured by the 'terms of
trade' and the 'baiance of trade'.
16 What is meant by an 'improvement' in the terms of
trade? Does it necessarily improve a nation's trade
balance?
't7 How would deterioration in the terms of trade affect the
current account of a country?
18 With reference to the Marshal-Lerner condition explain
how the depreciation of a country3 exchange rate might
affect its current account balance.
19 Explain the link between the lvlarshall-Lerner condition
and the i-curve effect.
Explain why depreciation of a country's exchange rate
rnight not improve its current account balance.