Economics 9708 · syllabus 11
Cambridge A Level Economics 9708 — International economic issues (A Level) topical past papers
The balance of payments and exchange rate systems, the Marshall–Lerner condition and J-curve, development and how it is measured, and the effects of globalisation.
- Questions
- 275
- Years
- 2002–2026
- With mark scheme
- 100%
- Questions 2022–2026
- 170
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What International economic issues (A Level) covers
The balance of payments is more than the current account: the capital and financial accounts record transfers of assets, investment and borrowing, and with net errors and omissions all the accounts sum to zero. A depreciation improves the current account only if demand responds enough to the change in prices. The Marshall–Lerner condition says the price elasticities of demand for exports and imports must add up to more than one; because demand responds slowly, the current account often worsens before it improves, tracing a J-curve. Exchange rates can float, be fixed by a central bank buying and selling its currency, or be managed within limits; a fixed rate gives traders certainty but ties monetary policy to defending the rate.
Development is broader than growth. Real GDP per head, best compared at purchasing power parity, measures average income but not how it is shared or the quality of life, so composite indicators are used as well: the Human Development Index combines income, education and life expectancy, and the Multidimensional Poverty Index counts deprivations in health, education and living standards. Countries at different levels of development differ in population growth and age structure, the distribution of income, the shares of primary, secondary and tertiary industry in output and employment, and the extent of urbanisation.
Countries are linked by trade, aid, foreign direct investment by multinational companies, and debt, and the International Monetary Fund and the World Bank lend to them and advise them. Globalisation, the growing integration of economies through trade, capital flows and the movement of people and technology, has spread knowledge and raised incomes, but it also exposes industries and workers to competition and economies to shocks from abroad. Trade agreements range from free trade areas and customs unions to monetary unions; they create trade when dearer domestic output gives way to cheaper imports from members, and divert it when cheaper imports from outside give way to dearer ones from inside. This is A Level content, examined on Papers 3 and 4.
In the syllabus
The headings this topic has in the Cambridge International 2026–2028 syllabus, as the board prints them.
- 11 International economic issues (A Level)
- 11.1 Policies to correct disequilibrium in the balance of payments
- 11.2 Exchange rates
- 11.3 Economic development
- 11.4 Characteristics of countries at different levels of development
- 11.5 Relationship between countries at different levels of development
- 11.6 Globalisation
What you should be able to do
- Explain the accounts of the balance of payments and the causes and consequences of disequilibrium
- Apply the Marshall–Lerner condition and explain the J-curve effect of a depreciation
- Compare floating, fixed and managed exchange rates, and explain how a central bank holds a fixed rate
- Compare indicators of development, including GDP per head at purchasing power parity, the HDI and the MPI, and explain their limitations
- Describe the characteristics of countries at different levels of development, such as population structure, income distribution and employment by sector
- Evaluate the effects of aid, foreign direct investment, multinational companies, debt and globalisation on developing economies, and explain trade creation and trade diversion
Key ideas
- Marshall–Lerner condition: a depreciation improves the current account if PED for exports + PED for imports > 1, ignoring signs
- J-curve: after a depreciation the current account first worsens, because trade volumes respond slowly, then improves as they adjust
- Human Development Index: a composite of life expectancy, education (mean and expected years of schooling) and GNI per head at PPP, on a scale from 0 to 1
- Purchasing power parity adjusts incomes for differences in the cost of living between countries
- Trade creation: dearer domestic production replaced by cheaper imports from a member; trade diversion: cheaper imports from outside replaced by dearer ones from a member
- Current account + capital account + financial account + net errors and omissions = 0
How International economic issues (A Level) has been examined
From 2022 to 2026, International economic issues (A Level) was on Paper 4 · A Level Data Response and Essays in 14 of 14 exam series, worth about 23% of that paper’s marks.
| Paper | Questions | Share of marks | Series |
|---|---|---|---|
| Paper 3 · A Level Multiple Choice | 125 | 12% | 11 of 14 |
| Paper 4 · A Level Data Response and Essays | 45 | 23% | 14 of 14 |
Momentum’s own count, over the questions in its bank for these years: a series is one exam session, every zone included, and a question filed under two chapters counts in both. Median marks per question: 1. The bank files this topic together with neighbouring ones, so these figures count every question in its chapters, including some on those topics.
Filed in Momentum under: International Economic Issues.
A worked example
A country's exports and imports are each worth 100 billion pesos a year when the peso depreciates from 20 to 25 pesos per dollar. Export prices are set in pesos and import prices in dollars. In the first year export volumes rise by 8% and import volumes fall by 4%; after three years, export volumes are 30% higher and import volumes 16% lower than at the start. Find the trade balance in pesos at each stage.
- A peso is now worth $0.04 instead of $0.05, a depreciation of 20%: exports cost 20% less in dollars, while each import costs 25 ÷ 20 = 1.25 times as many pesos
- First year: exports = 100 × 1.08 = 108 billion pesos; imports = 100 × 1.25 × 0.96 = 120 billion pesos; balance = 108 − 120 = −12 billion pesos
- The implied price elasticities are 8 ÷ 20 = 0.4 for exports and 4 ÷ 25 = 0.16 for imports; their sum, 0.56, is below one, so the balance worsens
- After three years: exports = 100 × 1.30 = 130 billion pesos; imports = 100 × 1.25 × 0.84 = 105 billion pesos; balance = +25 billion pesos
- Now the elasticities are 30 ÷ 20 = 1.5 and 16 ÷ 25 = 0.64, summing to 2.14, so the balance improves: down first, then up, which is the J-curve
Answer: The trade balance moves from zero to a deficit of 12 billion pesos in the first year, then to a surplus of 25 billion pesos after three years
Written by Momentum for this page, with its own numbers; it is not taken from a past paper.
Mistakes that cost marks
- Stating the Marshall–Lerner condition as each elasticity being above one — it is the sum of the two price elasticities that must exceed one
- Explaining the first fall in the J-curve by a fall in exports — at first volumes barely change, while each import costs more in domestic currency, so the deficit widens until volumes respond
- Comparing living standards with GDP per head at market exchange rates — that ignores differences in the cost of living and in how income is shared, so PPP figures and composite measures compare more fairly
- Assuming foreign direct investment always benefits the host country — profits may be sent abroad and local firms crowded out, so the gains depend on the jobs, skills, technology and tax revenue it brings
- Treating a customs union as plain free trade — its members also set a common external tariff, which is what can divert trade from cheaper producers outside
Exam technique
- In Paper 3 exchange rate questions, look at the change from both sides: if one currency appreciates against another, the other depreciates against it, by a different percentage
- In data-response questions on development, compare countries on more than one indicator from the source and explain why their rankings differ
- In essays on a depreciation or a fixed exchange rate, evaluate with the elasticities, the time frame of the J-curve, the effect on inflation and how trading partners respond
- When writing about globalisation or aid, separate the effects on different groups and countries — exporters and import-competing firms, skilled and unskilled workers, low-income and high-income economies — and weigh short-run costs against long-run gains
Practising in Momentum
- Every question in a chapter as one list, from every paper and year in the bank, newest first or shuffled.
- Each question turns over to its own part of the mark scheme, where the board published one.
- Narrow by paper, year, session, zone and marks, and star the questions worth keeping.
- Pick chapters, a number of questions and a time, and the exam builder draws a mock to sit and mark.
Past-paper questions and mark schemes are the copyright of Cambridge International. Momentum shows them to signed-in learners for revision and does not publish them on these pages.