CAIE IGCSE Economics 6. International trade and globalisation Question Bank

Read the source material carefully before answering Question 1.
Source material: What does the future hold for Nicaragua?

Nicaragua is the largest country in Central America. It has a large agricultural sector with one of its main exports being coffee. It has been estimated that a $10 \%$ change in the price of coffee will cause a $3 \%$ change in the quantity of coffee demanded. The country's agricultural output, including coffee, is often affected by natural disasters including droughts and earthquakes.

Nicaragua is the country with the lowest Gross Domestic Product (GDP) per head in Central America. Wages are particularly low in the rural areas of the country. There is a high degree of income inequality and firms tend to earn lower profits than in other Central American countries. The number of Nicaraguans who were willing and able to work but could not find a job increased as calculated by both the claimant count and the labour force survey in 2020.

The purchasing power of Nicaraguan consumers fell in 2020 as prices rose by more than incomes. However, the country's currency, the cordoba, was still generally acceptable. It continued to act as a medium of exchange and store of value.

Nicaragua's future economic performance will be influenced by a number of factors. These include the proportion of the labour force employed in agriculture, the size of the country's firms and what the country produces. Table 1.1 shows the percentage of the labour force employed in agriculture and GDP per head in selected countries in 2020.

Nicaraguan firms tend to be relatively small. These firms often get to know their individual customers' requirements but many are not large enough to benefit from economies of scale. In recent years, there has been a boom in coffee shops in Nicaragua. Between 2015 and 2020, the number of coffee shops more than doubled in the country. These shops differentiate themselves through their customer service and the quality of the coffee they serve.

Nicaragua is the world's twelfth largest producer of coffee. Global coffee consumption continues to increase. This trend may increase Nicaragua's coffee output and exports.

Discuss whether or not Nicaragua should devote more of its resources to coffee production.

Each question is introduced by stimulus material. In your answers you may refer to the material and/or other examples you have studied.

What is the least likely feature of globalisation?

What is the definition of foreign exchange rate?

Read the source material carefully before answering Question 1.

Between 1990 and 2022, Romania's population fell from 23 million to 19 million. The country's birth rate and death rate both fell over this period. Some workers from other countries, including Sri Lanka and Vietnam, came to live in Romania. However, more Romanian workers left the country to work and live mostly in other European countries.

If the Romanian economy continues to grow at its relatively high rate, fewer of its people may emigrate and more immigrants may be attracted. Recent economic growth has been driven largely by increases in household spending. Romanians have become wealthier, more confident about their future and have experienced low interest rates.

In April 2022, the Romanian Government placed a maximum price on electricity. Romanians spend a relatively high proportion of their income on electricity and on food. Table 1.1 shows selected countries' GDP per head and average spending on food as a percentage of total household spending.

The poor are particularly affected by changes in electricity prices and food prices. Romania has a relatively high level of poverty. To reduce poverty, some economists have suggested that the government should attract more foreign multinational companies (MNCs) to Romania. More MNCs may affect poverty because of the possible effects on unemployment and prices.

Another way to reduce poverty would be to encourage more women to work. The proportion of women in Romania who work or seek work has fallen in recent years. There is a range of influences on whether women enter the labour force. These include social attitudes, female education and whether childcare facilities and part-time work are available.