IGCSE Economics Paper-1: Specimen Questions with Answers 11 - 12 of 64

Question 11

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Ireland has attracted a significant number of foreign multinational companies (MNCs) to set up production in the country. These firms employ approximately 10 % of the country’s labour force and make a high proportion of Ireland’s exports. The surplus on the current account of Ireland’s balance of payments fell in 2016 while government spending rose.

Identify two reasons why an MNC may decide to start producing in a foreign country. (Marks 2)

Explanation

  • Availability of cheap labour in the foreign country.
  • Accessibility of more raw materials in the foreign country.

Question 12

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Ireland has attracted a significant number of foreign multinational companies (MNCs) to set up production in the country. These firms employ approximately 10 % of the country’s labour force and make a high proportion of Ireland’s exports. The surplus on the current account of Ireland’s balance of payments fell in 2016 while government spending rose.

Analyse how an increase in exports could improve a country’s economic performance. (Marks 6)

Explanation

  • If export is more, export revenue will also be more. It may exceed import expenditure made by the country. As these two are parts of current account in balance of payment, this may improve current account balance and decrease current account deficit problem.
  • As more exports are made, people will have more money in the country. They will demand more products. This will increase profits earned by firms. They will produce more output by employing more people. This will increase employment and economic growth in the country.
  • This will also increase income of the people and improves standard of living.

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