O Level Economics chapter 6: International trade and globalisation MCQs with answers
By Team Megalecture · Updated 4 Nov 2026
55 exam-style questions on International trade and globalisation, 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.
Current account of the balance of payments14 questions
Ten International trade and globalisation questions with answers
Try each one, then open the answer. These ten stay the same; the test draws new ones every time.
1. Why might free trade harm some domestic firms?
A
they may be unable to compete with cheaper imports
B
they will lose access to markets in other countries
C
they will have to pay tariffs on all of their exports
D
they will face less competition and become inefficient
Show answer
Answer: A. Removing trade barriers exposes domestic firms to foreign rivals; firms with higher costs may lose sales and close, causing job losses.
2. A country's current account deficit widens because its exports fall sharply. What is the most likely effect on the domestic economy?
A
GDP and employment fall as total demand falls
B
the currency appreciates as a result of the fall in exports
C
employment rises in the export industries
D
inflation rises as total demand increases
Show answer
Answer: A. Exports are part of total demand, so a fall in exports reduces output and jobs, especially in export industries. It also tends to reduce inflation and to weaken the currency.
3. Why might supply-side policies give a longer-lasting improvement in the current account than tariffs?
A
they raise productivity, making exports more competitive
B
they raise the price of imports straight away
C
they can be introduced quickly and take effect almost at once
D
they reduce total demand in the economy
Show answer
Answer: A. Better skills, technology and infrastructure lower costs and raise quality, so exports compete better without restrictions that may provoke retaliation. However, supply-side policies take time to work.
4. Pakistanis who live and work permanently in Saudi Arabia send money to their families in Pakistan. In which part of Pakistan's current account is this recorded?
A
secondary income
B
primary income
C
trade in services
D
trade in goods
Show answer
Answer: A. Workers' remittances are transfers to families for which nothing is given in return, so they are secondary income. Primary income is income earned by factors of production, such as interest, profits, dividends and the wages of people who work abroad only for a short time; these workers have settled in Saudi Arabia.
5. A foreign MNC operating in Pakistan sends its profits back to its head office abroad. How does this affect the market for rupees?
A
the MNC supplies rupees in exchange for foreign currency
B
the MNC supplies foreign currency in exchange for rupees
C
the MNC demands rupees in exchange for foreign currency
D
it has no effect, because profits are not traded goods
Show answer
Answer: A. The profits are earned in rupees but needed in the MNC's home currency, so rupees are sold (supplied) to buy foreign currency. Payments of profit, interest and dividends between countries are one reason for buying and selling currencies.
6. A government bans all trade with a particular country. What is this measure called?
A
a subsidy
B
a tariff
C
an embargo
D
an import quota
Show answer
Answer: C. An embargo is a ban on trade, either with a country or in a particular product. It is the strictest form of trade restriction.
7. A country earns most of its export revenue from a single crop. What is the main risk of this specialisation?
A
the cost of growing the crop will rise every single year
B
a fall in its world price could sharply cut export earnings
C
the country will no longer be able to import any other goods
D
the country will have too few workers to harvest the crop
Show answer
Answer: B. Relying on one export makes a country vulnerable: bad weather, disease or a fall in world demand or price can cut incomes and jobs sharply.
8. A country exports goods worth $25 bn and services worth $8 bn. It imports goods worth $40 bn and services worth $10 bn. What is its balance of trade in goods and services?
A
−$17 bn
B
−$15 bn
C
−$2 bn
D
+$3 bn
Show answer
Answer: A. Goods: 25 − 40 = −$15 bn. Services: 8 − 10 = −$2 bn. Together: −$17 bn. −$15 bn is the balance on goods alone.
9. What is meant by specialisation by country?
A
a country bans imports of any goods that it could make for itself
B
a country produces every good its people need, so it does not trade
C
each worker on a production line concentrates on a single task
D
a country focuses on goods and services it can make at low cost
Show answer
Answer: D. Countries specialise in products for which their resources give them low costs, and trade for the rest. One worker doing one task is specialisation of labour (division of labour), not specialisation by country.
10. A government restricts imports of solar panels until its new domestic solar-panel industry is large enough to compete. Which reason for protection is this?
A
protecting a declining (sunset) industry
B
protecting an infant (sunrise) industry
C
avoiding dumping
D
raising tax revenue
Show answer
Answer: B. Infant industries may have high costs at first because they are small. Temporary protection gives them time to grow and gain economies of scale.
International trade and globalisation: questions students ask
How many International trade and globalisation MCQs are there?
55, each with the answer and a short explanation, across 4 topics: Specialisation and free trade, Globalisation and trade restrictions, Foreign exchange rates, Current account of the balance of payments. Every chapter test draws ten of them, so you can take it many times.
Is the O 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.
