Paper 2 Practice: Globalisation and the International Economy

Original topic practice

The contexts are fictional. This is not a complete Paper 2.

Question 1: Specialisation and adjustment

Two economies remove trade barriers. They differ in opportunity costs, but workers in import-competing regions have specialised skills.

(a) Explain how comparative advantage can create gains from specialisation and trade. [10]

(b) Discuss whether free trade is likely to benefit each economy. [15]

Question 2: Capital and labour mobility

A high-income economy receives foreign direct investment and migrant labour while domestic firms expand production abroad.

(a) Explain how international capital and labour flows may affect its productive capacity. [10]

(b) Discuss whether the government should restrict these flows. [15]

Outlines: International Economy — Outlines.