AS Level Economics chapter 6: International economic issues MCQs with answers

By Team Megalecture · Updated 4 Nov 2026

69 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.

69 questions · 5 topics · 10 per test

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What chapter 6 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. What is a likely consequence of a large and persistent current account surplus for the surplus country?

  1. A
    upward pressure on its exchange rate, reducing export competitiveness
  2. B
    downward pressure on its exchange rate, making its imports more expensive
  3. C
    a fall in AD because its net exports are negative
  4. D
    a need to borrow from abroad to pay for its imports
Show answer

Answer: A. Export earnings exceed spending abroad, so demand for the currency exceeds supply and it tends to appreciate, making exports dearer. A surplus adds to AD, and it is deficit countries that must borrow.

2. Which policy reduces a current account deficit mainly by encouraging people to buy domestic goods instead of imports, rather than by reducing total spending?

  1. A
    a rise in the rate of income tax on all earners
  2. B
    a rise in the central bank's interest rate
  3. C
    an import quota on foreign-made cars
  4. D
    a cut in government spending
Show answer

Answer: C. A quota switches spending from imports to domestic products. Higher taxes, higher interest rates and lower government spending work by reducing total spending, which cuts imports but also demand for domestic goods.

3. A country's current account balance is −$12 bn. Its balance of trade in goods is −$30 bn, its primary income balance is −$8 bn and its secondary income balance is +$6 bn. What is its balance of trade in services?

  1. A
    −$20 bn
  2. B
    +$12 bn
  3. C
    +$20 bn
  4. D
    +$26 bn
Show answer

Answer: C. CAB = goods + services + primary income + secondary income, so −12 = −30 + services − 8 + 6, giving services = +$20 bn. +$26 bn ignores the secondary income balance.

4. What is an exchange rate?

  1. A
    the rate of interest paid on loans from foreign banks
  2. B
    the ratio of export prices to import prices
  3. C
    the amount of foreign currency held by the central bank as reserves
  4. D
    the price of one currency expressed in terms of another currency
Show answer

Answer: D. An exchange rate states how much of one currency is needed to buy one unit of another. The ratio of export prices to import prices is the terms of trade.

5. A tariff on imported steel protects jobs in a country's steel industry. Why might it reduce employment in the country's car industry?

  1. A
    more steel is imported, and this steel competes with the products of car makers
  2. B
    car makers pay more for steel, so their costs rise and sales fall
  3. C
    the price of cars falls, so car makers cut their output and employment
  4. D
    the tariff is also charged on every car that is made in the country
Show answer

Answer: B. Steel is an input for cars. The tariff raises the domestic price of steel, so the car industry's costs rise; its cars become less competitive at home and abroad, and it may need fewer workers.

6. A current account deficit is caused by high consumer spending on imports. Which fiscal policy measure is most likely to reduce the deficit?

  1. A
    cutting income tax to raise disposable income
  2. B
    raising spending on imported military equipment
  3. C
    raising unemployment benefits
  4. D
    raising income tax to reduce disposable income
Show answer

Answer: D. Higher income tax reduces disposable income and so spending, including spending on imports. The other measures raise spending and would tend to widen the deficit.

7. What does the government objective of stability of the current account usually mean?

  1. A
    achieving a large surplus in every year
  2. B
    keeping exports equal to imports in every month
  3. C
    keeping the exchange rate fixed against the dollar
  4. D
    avoiding large and persistent deficits or surpluses
Show answer

Answer: D. Small, temporary deficits and surpluses are normal. The objective is to avoid large imbalances that last for years, since they cause problems for the country and for its trading partners.

8. Which item is recorded under trade in services in a country's current account?

  1. A
    dividends received from shares in foreign companies
  2. B
    grants of aid received from a foreign government
  3. C
    exports of cotton cloth to other countries
  4. D
    spending by foreign tourists in the country's hotels
Show answer

Answer: D. Tourism by foreign visitors is an export of services. Dividends are primary income, aid grants are secondary income, and cloth is trade in goods.

9. A country imports most of its fuel and raw materials. How is its SRAS curve likely to be affected by a depreciation of its currency?

  1. A
    it shifts right, because imported inputs cost less in domestic currency
  2. B
    it shifts left, because imported inputs cost more in domestic currency
  3. C
    it does not move, because exchange rates affect only AD
  4. D
    it shifts right, because exporters sell more abroad
Show answer

Answer: B. After a depreciation each unit of foreign currency costs more, so imported fuel and materials become dearer. Firms' costs rise and SRAS shifts to the left, which can add cost-push inflation to the demand-side effects.

10. A country imports most of its raw materials. Its floating currency appreciates strongly. What is the most likely effect on its price level?

  1. A
    it falls, because SRAS shifts right and AD shifts left
  2. B
    it rises, because AD shifts right and SRAS shifts left
  3. C
    it rises, because SRAS shifts left while AD does not change
  4. D
    it does not change, because the shifts in AD and SRAS cancel out
Show answer

Answer: A. Cheaper imported raw materials lower firms' costs (SRAS shifts right), and dearer exports with cheaper imports reduce net exports (AD shifts left). Both shifts lower the price level, or the rate of inflation; only the effect on real output is uncertain.

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International economic issues: questions students ask

How many International economic issues MCQs are there?

69, each with the answer and a short explanation, across 5 topics: The reasons for international trade, Protectionism, Current account of the balance of payments, Exchange rates, Policies to correct imbalances in the current account of the balance of payments. Every chapter test draws ten of them, so you can take it many times.

Is the AS Level Economics chapter 6 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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