A Level Economics (A2) chapter 5: International economic issues MCQs with answers

By Team Megalecture · Updated 4 Nov 2026

93 exam-style questions on International economic issues, each with the answer and a short explanation. Ten of them are below to try. The chapter test draws ten fresh questions each time and is marked the moment you finish, with your score by topic.

93 questions · 6 topics · 10 per test

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What chapter 5 covers

Ten International economic issues questions with answers

Try each one, then open the answer. These ten stay the same; the test draws new ones every time.

1. A country's GDP is $800bn, its net primary income from abroad is −$30bn and its capital consumption (depreciation) is $70bn. What are its GNI and NNI?

  1. A
    GNI $830bn and NNI $760bn
  2. B
    GNI $770bn and NNI $700bn
  3. C
    GNI $770bn and NNI $840bn
  4. D
    GNI $800bn and NNI $730bn
Show answer

Answer: B. GNI = GDP + net primary income from abroad = 800 − 30 = $770bn; NNI = GNI − depreciation = 770 − 70 = $700bn. $830bn adds the net outflow of income as if it were an inflow.

2. Which feature is essential for a monetary union?

  1. A
    a common external tariff on goods from non-members
  2. B
    free trade in goods only, with each member keeping its own currency
  3. C
    a single currency, with one central bank setting monetary policy
  4. D
    a single fiscal policy, with one tax system for all member countries
Show answer

Answer: C. In a monetary union members share a currency, so one central bank sets interest rates for all of them. Fiscal policy can remain national; harmonising it is a feature of full economic union.

3. Which feature is most typical of a developed economy?

  1. A
    a large share of total employment in agriculture and mining
  2. B
    a high birth rate and a very young, fast-growing population
  3. C
    a high HDI value, with most employment in the tertiary sector
  4. D
    heavy dependence on exports of a few primary products
Show answer

Answer: C. Developed economies have high living standards on health, education and income, and most of their workforce is in services. The other features are typical of developing economies.

4. Country A imposes a 25% tariff on all imports of a good. The good can be produced for $10 in Country B, for $11 in Country C and for $14 in Country A itself. Country A then forms a customs union with C, keeping a 25% tariff on non-members. What happens?

  1. A
    A switches its imports from B to C: trade creation
  2. B
    A replaces its imports with its own production: trade diversion
  3. C
    A continues to import from B: no change
  4. D
    A switches its imports from B to C: trade diversion
Show answer

Answer: D. Before the union, B's good costs $12.50 in A with the tariff, cheaper than C's $13.75 or A's own $14, so A imports from B. After the union, C's good enters tariff-free at $11, so imports switch from the lower-cost B to the higher-cost C.

5. A low-income country wants to build rural schools and clinics that will not earn a commercial return. Why might it seek finance from the World Bank rather than from commercial banks?

  1. A
    the World Bank lends only to high-income countries with good credit ratings
  2. B
    the World Bank provides short-term loans to finance balance of payments deficits
  3. C
    the World Bank offers long-term loans at low interest, and some grants, for development
  4. D
    the World Bank can create new money to repay the country's debts to other lenders
Show answer

Answer: C. The World Bank finances development projects such as education, health and infrastructure, often on concessional terms (low interest, long repayment periods and grants for the poorest countries) that commercial lenders would not offer. Short-term balance of payments support is the role of the IMF.

6. In a country, 30% of the population are identified as multidimensionally poor, and on average they are deprived in 45% of the weighted indicators. What is the country's Multidimensional Poverty Index (MPI)?

  1. A
    0.75
  2. B
    0.135
  3. C
    0.667
  4. D
    0.15
Show answer

Answer: B. The MPI is the headcount ratio multiplied by the average intensity of deprivation: 0.30 × 0.45 = 0.135. Adding or dividing the two figures does not measure poverty.

7. A low-income country's index of export prices falls from 100 to 90, while its index of import prices rises from 100 to 105. What is its new terms of trade index?

  1. A
    116.7
  2. B
    85.7
  3. C
    94.5
  4. D
    90.0
Show answer

Answer: B. Terms of trade = (index of export prices ÷ index of import prices) × 100 = 90 ÷ 105 × 100 = 85.7, a deterioration. 116.7 inverts the ratio.

8. Countries are sometimes classified as having very high, high, medium or low human development. On what is this classification based?

  1. A
    their GNI per head at market exchange rates
  2. B
    their Human Development Index value
  3. C
    their rate of economic growth
  4. D
    their Gini coefficient
Show answer

Answer: B. The UN groups countries into these four categories according to their HDI, which combines health, education and income per head.

9. The price elasticity of demand for a country's exports is −0.4 and for its imports is −0.3. Its balance of trade is in deficit. What is the effect of a depreciation of its currency on the balance of trade, and why?

  1. A
    it improves, because both elasticities are negative
  2. B
    it worsens, because the sum of the elasticities is less than 1
  3. C
    it improves, because the sum of the elasticities is less than 1
  4. D
    it worsens, because the elasticity for exports is greater than that for imports
Show answer

Answer: B. The sum of the elasticities (ignoring signs) is 0.4 + 0.3 = 0.7, which is less than 1, so the Marshall-Lerner condition is not met. Export and import volumes respond too little to offset the lower price of exports and the higher domestic price of imports.

10. Which change is most likely to reduce the birth rate in a developing economy?

  1. A
    a rise in infant mortality
  2. B
    more girls completing secondary school and entering paid work
  3. C
    a larger share of employment in subsistence farming
  4. D
    parents relying on their children for financial support in old age
Show answer

Answer: B. Education and paid work for women raise the opportunity cost of having children and increase knowledge of family planning. High infant mortality, farm labour needs and lack of pensions all encourage larger families.

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Ways to practise this chapter

International economic issues: questions students ask

How many International economic issues MCQs are there?

93, each with the answer and a short explanation, across 6 topics: Policies to correct disequilibrium in the balance of payments, Exchange rates, Economic development, Characteristics of countries at different levels of development, Relationship between countries at different levels of development, Globalisation. Every chapter test draws ten of them, so you can take it many times.

Is the A Level Economics (A2) chapter 5 test free?

Yes. The test, the answers and the explanations are free and need no sign-up. Sign in only if you want your scores kept across devices.

How is the chapter test marked?

The moment you press Finish: your score, the right answer and an explanation for every question, and the ones you got wrong saved in My mistakes to retry.

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