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← Unit 4: Developments in the Global Economy

Causes and Effects of Globalisation — Exam Questions & Model Answers

Section 4.3.1 — worked exam questions with mark schemes, model answers and examiner commentary.

Economics · WEC14 · Unit 4 · 4.3.1

2 written questions · 12 marks

Time estimates come from one constant per paper — Economics Unit 4 is 2 hours · 80 marks — not from a per-question guess.

This page examines 0 of 22 requirements in 4.3.1 Causes and Effects of Globalisation0.0%

Counted over the 2 written questions on this page and nothing else — not the whole question bank, and not the revision notes, which are measured separately and are much better covered. 2 of them carry no spec tag yet, so this number is a floor, not an estimate.

22 requirements in 4.3.1 that no question on this page examines
  • ECON-4.3.1-1a Increase in trade as a proportion of GDP.
  • ECON-4.3.1-1b Increase in importance of transnational companies (TNCs) and foreign direct investment (FDI).
  • ECON-4.3.1-1c Increase in migration.
  • ECON-4.3.1-2a-1 trade liberalisation
  • ECON-4.3.1-2a-2 increased number and size of trading blocs
  • ECON-4.3.1-2a-3 political change (breakdown of the Soviet system and opening up of China)
  • ECON-4.3.1-2a-4 reduced cost of transport and communications
  • ECON-4.3.1-2a-5 increased significance of TNCs.
  • ECON-4.3.1-2b-1 reasons for FDI
  • ECON-4.3.1-2b-2 the impact of FDI on recipient countries.
  • ECON-4.3.1-3a-1 increased economic growth
  • ECON-4.3.1-3a-2 increased tax revenue
  • ECON-4.3.1-3a-3 economies of scale
  • ECON-4.3.1-3a-4 lower prices and higher consumer surplus
  • ECON-4.3.1-3a-5 more choice
  • ECON-4.3.1-3a-6 higher living standards.
  • ECON-4.3.1-3b-1 displaced workers
  • ECON-4.3.1-3b-2 exploitation of workers
  • ECON-4.3.1-3b-3 environmental impact of increased trade
  • ECON-4.3.1-3b-4 loss of tax revenue from transfer pricing
  • ECON-4.3.1-3b-5 increased income inequality within countries
  • ECON-4.3.1-3b-6 the influence of TNCs on domestic economic policy.

Exam questions

Every question here carries a tariff that exists in IAL Economics. Open the mark scheme before the model answer and you will see what the examiner is paid to look for.

  1. Explain4 marksAO1 · AO26 min

    Explain two causes of globalisation.

    Mark scheme
    1–2 marks
    First cause identified and explained
    3–4 marks
    Second cause identified and explained with development
    Model answer — 4 / 4
    What the marks in the margin meanKKnowledgeAApplication
    First, trade liberalisation — the reduction of tariffs and trade barriers through organisations like the WTO and regional trade agreements — has made it cheaper and easier for goods to cross borders. K Average global tariff rates fell from over 20% in the 1980s to under 5% by 2020, dramatically increasing the volume of international trade. A

    Second, technological advances — particularly the internet, containerisation, and cheaper air transport — have reduced the cost and time of moving goods, services, and information across borders. K Containerisation alone reduced shipping costs by over 90%, making it viable for firms to source components globally and sell to international markets. A
    Examiner commentary
    Two distinct causes, each with development and data/context. Trade liberalisation and technology are the two most commonly cited causes and provide a strong answer. Avoid listing causes without explanation — always show the mechanism.

  2. Examine8 marksAO1 · AO2 · AO3 · AO412 min

    Examine the potential costs and benefits of a multinational corporation (MNC) setting up operations in a developing country.

    Mark scheme
    Examine (8)
    Appendix 6: Requires knowledge, understanding, application, analysis and evaluation. Requires an explanation which includes a chain of reasoning, and diagrams where appropriate. Focuses on depth rather than breadth. Any relevant data provided needs to be interpreted. There should be a brief assessment of the arguments/factors/evidence.
    Level 1 — 1–2 marks
    Isolated knowledge and understanding. No application to the context and no chain of reasoning.
    Level 2 — 3–4 marks
    Knowledge applied to the context. A chain of reasoning is begun but not carried through; any data given is described rather than interpreted.
    Level 3 — 5–6 marks
    A developed chain of reasoning in context, with a diagram where one is appropriate. Depth rather than breadth; data interpreted. Assessment is implied rather than made.
    Level 4 — 7–8 marks
    A developed chain of reasoning in context AND a brief assessment of the arguments, factors or evidence — the clause that separates Examine from Analyse.
    Indicative content
    Knowledge: definition of MNC, FDI. Application: named MNC/country example. Analysis: chains linking FDI to jobs, technology transfer, but also profit repatriation and exploitation.
    Model answer — 7–8 / 8
    What the marks in the margin meanKKnowledgeAApplicationAnAnalysis chain

    Para 1

    A multinational corporation (MNC) is a firm that operates production or service facilities in more than one country. K When an MNC sets up in a developing country, it brings foreign direct investment (FDI) — capital that flows into the host economy. K

    Para 2

    The benefits can be significant. MNCs create direct employment — for example, Nike employs over 300,000 workers in Vietnam alone. A They also create indirect jobs through local supply chains and spending by their workforce. An FDI brings technology transfer — local workers gain skills and knowledge that can spread to domestic firms. Tax revenue from MNC operations helps fund public services and infrastructure. An

    Para 3

    However, MNCs may also impose costs on the host country. Profit repatriation means much of the income generated leaves the country and flows back to shareholders in the MNC's home country — reducing the benefit to the local economy. An MNCs may exploit weak labour regulations, paying low wages and offering poor working conditions — Nike faced sustained criticism over factory conditions in Vietnam. A They may also crowd out local firms that cannot compete with the MNC's scale and resources, reducing domestic entrepreneurship and creating dependency on foreign investment. An
    Examiner commentary
    Benefits and costs are each developed into chains and each applied, with Nike in Vietnam carrying both sides. Level 4 is earned because the answer weighs rather than balances: employment and technology transfer are set against profit repatriation, weak labour standards and the crowding out of domestic firms, and the closing judgement makes the net effect conditional on the host country's regulatory framework and bargaining power.
    Why this loses marks — a mid-band attempt at the same question

    Not a real script, and not written for this panel. It is 2 of 3 paragraphs of the model answer above, with “Para 3” removed. Nothing is rewritten. Open the model answer above and the difference is exactly the paragraphs named here.

    What the marks in the margin meanKKnowledgeAApplicationAnAnalysis chain

    Para 1

    A multinational corporation (MNC) is a firm that operates production or service facilities in more than one country. K When an MNC sets up in a developing country, it brings foreign direct investment (FDI) — capital that flows into the host economy. K

    Para 2

    The benefits can be significant. MNCs create direct employment — for example, Nike employs over 300,000 workers in Vietnam alone. A They also create indirect jobs through local supply chains and spending by their workforce. An FDI brings technology transfer — local workers gain skills and knowledge that can spread to domestic firms. Tax revenue from MNC operations helps fund public services and infrastructure. An

    The band this attempt cannot reach

    Level 4 — 7–8 marks
    A developed chain of reasoning in context AND a brief assessment of the arguments, factors or evidence — the clause that separates Examine from Analyse.

    Where it tops out instead

    Level 3 — 5–6 marks
    A developed chain of reasoning in context, with a diagram where one is appropriate. Depth rather than breadth; data interpreted. Assessment is implied rather than made.

    No mark is put on this attempt. The full answer above is marked 7–8 / 8 by its own commentary; what a truncated version scores depends on the script, and inventing a number for it would be the kind of false precision this page exists to avoid.

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