Unit 6 · International Economic Issues (AS & A Level)
The Complete Cambridge International AS & A Level Economics (9708) Guide · Cambridge International AS & A Level Economics (9708)Unit 6 · International Economic Issues (AS & A Level)
- The Complete Cambridge International AS & A Level Economics (9708) Guide
- Cambridge International AS & A Level Economics (9708)
- 6 sections
Cambridge International does not publish a per-unit weighting for this exam. Exam structure (official): AS Level: AS Level Multiple Choice (60 min, 30 questions, 33%) · AS Level Data Response And Essays (120 min, 67%); A Level: AS Level Multiple Choice (60 min, 30 questions, 17%) · AS Level Data Response And Essays (120 min, 33%) · A Level Multiple Choice (75 min, 30 questions, 17%) · A Level Data Response And Essays (120 min, 33%). Be ready to carry the same unit skills and representations into a complete answer on every paper. The vocabulary spine is absolute advantage, comparative advantage, specialisation, free trade, tariff, import quota, current account, exchange rate, appreciation, terms of trade. Revise them through comparative advantage, trade policy, the current account, and exchange rates: define the relationship, identify what changes, and keep the comparison needed for the software-export currency demand shift during recall.
- How Cambridge International AS & A Level Economics (9708) assesses this Cambridge International publishes no per-unit percentage for Cambridge International A Level Economics; Paper 1 accounts for 33% of the AS Level total and 17% of the A Level total. · AS Level: AS Level Multiple Choice (60 min, 30 questions, 33%) · AS Level Data Response And Essays (120 min, 67%) | A Level: AS Level Multiple Choice (60 min, 30 questions, 17%) · AS Level Data Response And Essays (120 min, 33%) · A Level Multiple Choice (75 min, 30 questions, 17%) · A Level Data Response And Essays (120 min, 33%) · show the model with Currency quantity and Currency price graph, D1, D2, S labels, Currency quantity is horizontal and Currency price is vertical., Population share and Income share graph, Perfect equality, Lorenz curve, 50%, 20% labels, Population share is horizontal and Income share is vertical.
- Key skills The Reasons for International Trade: Absolute and Comparative Advantage and the Terms of Trade, Protectionism: Tools, Impact and Arguments, Current Account of the Balance of Payments, Exchange Rates: Floating Rates, Depreciation and Appreciation, Policies to Correct Imbalances in the Current Account, Policies to Correct Disequilibrium in the Balance of Payments (A Level), Exchange Rates: Fixed and Managed Systems, the Marshall-Lerner Condition and the J Curve (A Level), Economic Development and Indicators of Living Standards (A Level), Characteristics of Countries at Different Levels of Development (A Level), Relationship Between Countries at Different Levels of Development: Aid, Trade, Multinationals, Foreign Direct Investment and Debt (A Level), Globalisation, Economic Integration, Trade Creation and Trade Diversion (A Level)
- How to study for Unit 6 This page turns Currency quantity and Currency price graph, D1, D2, S labels, Currency quantity is horizontal and Currency price is vertical., Population share and Income share graph, Perfect equality, Lorenz curve, 50%, 20% labels, Population share is horizontal and Income share is vertical. into one route: Currency demand P=100−Q and supply P=Q initially meet at Q=50, P=50..
- The organizing decision The currency market uses currency quantity horizontally and its domestic price vertically.
- What A Level adds The Lorenz diagram compares cumulative population and income shares. Topics: Policies to Correct Disequilibrium in the Balance of Payments; Exchange Rates: Fixed and Managed Systems, the Marshall-Lerner Condition and the J Curve; Economic Development and Indicators of Living Standards; Characteristics of Countries at Different Levels of Development; Relationship Between Countries at Different Levels of Development: Aid, Trade, Multinationals, Foreign Direct Investment and Debt; Globalisation, Economic Integration, Trade Creation and Trade Diversion.
What Cambridge International AS & A Level Economics (9708) Unit 6 covers
Use this map to connect each assessed skill to the relationship or representation that makes it visible.
The Reasons for International Trade: Absolute and Comparative Advantage and the Terms of Trade
absolute advantage; comparative advantage; specialisation02Protectionism: Tools, Impact and Arguments
absolute advantage; comparative advantage; specialisation03Current Account of the Balance of Payments
absolute advantage; comparative advantage; specialisation04Exchange Rates: Floating Rates, Depreciation and Appreciation
absolute advantage; comparative advantage; specialisation05Policies to Correct Imbalances in the Current Account
absolute advantage; comparative advantage; specialisation06Policies to Correct Disequilibrium in the Balance of Payments (A Level)
financial account; capital account; devaluation07Exchange Rates: Fixed and Managed Systems, the Marshall-Lerner Condition and the J Curve (A Level)
financial account; capital account; devaluation08Economic Development and Indicators of Living Standards (A Level)
financial account; capital account; devaluation09Characteristics of Countries at Different Levels of Development (A Level)
financial account; capital account; devaluation10Relationship Between Countries at Different Levels of Development: Aid, Trade, Multinationals, Foreign Direct Investment and Debt (A Level)
financial account; capital account; devaluation11Globalisation, Economic Integration, Trade Creation and Trade Diversion (A Level)
financial account; capital account; devaluationCambridge International does not publish a per-unit weighting for this exam.
Official unit name and weighting: Cambridge International syllabus.
International Economic Issues
Connect the published share to the unit model
The vocabulary spine is absolute advantage, comparative advantage, specialisation, free trade, tariff, import quota, current account, exchange rate, appreciation, terms of trade. Revise them through comparative advantage, trade policy, the current account, and exchange rates: define the relationship, identify what changes, and keep the comparison needed for the software-export currency demand shift during recall.
The currency market uses currency quantity horizontally and its domestic price vertically. Extra demand for software exports shifts D1 to D2 against an unchanged currency-supply curve.
The decision that organizes this unit
Define the system and choose the route before calculating
The currency market uses currency quantity horizontally and its domestic price vertically.
Currency demand P=100−Q and supply P=Q initially meet at Q=50, P=50.
Mechanism route and repair branches
Relationships to preserve
- Keep the software-export mechanism tied to the currency market: higher foreign demand for exports raises demand for the currency.
- For comparative advantage, calculate opportunity cost separately for each producer before choosing specialisation.
- The terms-of-trade index, current-account balance, and currency conversion use different inputs.
- The survey orders households from lowest to highest income before cumulative shares are plotted.
- Exchange-rate questions need a separate sequence: identify the regime, quotation, price levels, and trade-response condition.
- Development comparisons may use per-capita income, purchasing-power adjustments, HDI, or the Gini coefficient.
Representations to read
- Currency quantity and Currency price graph
- D1, D2, S labels
- Currency quantity is horizontal and Currency price is vertical.
- Population share and Income share graph
- Perfect equality, Lorenz curve, 50%, 20% labels
- Population share is horizontal and Income share is vertical.
Branches to reject
- Absolute output can distract from opportunity cost.
- The quotation direction determines what a rise means.
- Export and import price indices can be reversed.
- A policy change under a fixed system can be confused with depreciation.
- The 30-point vertical gap is not itself the Gini value.
- Debt service can be divided by the wrong foreign-currency flow.
| Key concept | Why it's hard | What scores |
|---|---|---|
| comparative advantage | Absolute output can distract from opportunity cost. | Compare the amount of Y forgone per unit of X. |
| exchange-rate appreciation | The quotation direction determines what a rise means. | Name the currency whose domestic price moves from 50 to 60. |
| terms of trade | Export and import price indices can be reversed. | Place the export-price index above the import-price index. |
How Cambridge International AS & A Level Economics (9708) assesses International Economic Issues (AS & A Level)
What a complete response must make visible
Match the task to evidence that a reader can audit, then check the most likely reasoning failure before finalizing the response.
| Task | Evidence to show | Hurdle |
|---|---|---|
| The Reasons for International Trade: Absolute and Comparative Advantage and the Terms of Trade | absolute advantage; comparative advantage; specialisation | Absolute output can distract from opportunity cost. |
| Protectionism: Tools, Impact and Arguments | absolute advantage; comparative advantage; specialisation | The quotation direction determines what a rise means. |
| Current Account of the Balance of Payments | absolute advantage; comparative advantage; specialisation | Export and import price indices can be reversed. |
| Exchange Rates: Floating Rates, Depreciation and Appreciation | absolute advantage; comparative advantage; specialisation | A policy change under a fixed system can be confused with depreciation. |
| Policies to Correct Imbalances in the Current Account | absolute advantage; comparative advantage; specialisation | The 30-point vertical gap is not itself the Gini value. |
| Policies to Correct Disequilibrium in the Balance of Payments (A Level) | financial account; capital account; devaluation | Debt service can be divided by the wrong foreign-currency flow. |
| Exchange Rates: Fixed and Managed Systems, the Marshall-Lerner Condition and the J Curve (A Level) | financial account; capital account; devaluation | Absolute output can distract from opportunity cost. |
| Economic Development and Indicators of Living Standards (A Level) | financial account; capital account; devaluation | The quotation direction determines what a rise means. |
| Characteristics of Countries at Different Levels of Development (A Level) | financial account; capital account; devaluation | Export and import price indices can be reversed. |
| Relationship Between Countries at Different Levels of Development: Aid, Trade, Multinationals, Foreign Direct Investment and Debt (A Level) | financial account; capital account; devaluation | A policy change under a fixed system can be confused with depreciation. |
| Globalisation, Economic Integration, Trade Creation and Trade Diversion (A Level) | financial account; capital account; devaluation | The 30-point vertical gap is not itself the Gini value. |
AS trade and exchange: draw and solve the model
Read each question as it appears on the exam paper, choose your answer, then tap it to see the feedback.
Practice 1: Export demand and currency appreciation
Overseas buyers increase demand for a country’s software exports and need more of its currency.
The currency’s initial demand is P = 100 − Q and supply is P = Q. Export growth changes demand to P = 120 − Q while supply is unchanged. P is the domestic price of the currency. (a) Calculate both equilibria. (b) State whether the currency appreciates or depreciates. (c) Explain the change using a currency-market diagram.
Show your working and state how the exchange rate is quoted.
A. Solve the equilibria as (50, 50) and (60, 60), then call the rise in the domestic price of the currency an appreciation.
✅ Correct! 😊 This calculates both intersections and interprets the vertical-axis quotation correctly. A rise from 50 to 60 means the currency’s domestic price has increased.
B. Solve the equilibria correctly but call the rise from 50 to 60 a depreciation.
❌ Not quite 😭 The calculation is sound but the interpretation reverses the stated quotation. A higher domestic price of the currency is an appreciation in this diagram.
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C. Shift currency supply right because exporters receive foreign sales revenue, giving a lower currency price.
❌ Not quite 😭 The scenario says overseas buyers need more domestic currency to purchase exports. That raises demand for the currency; it does not shift the stated supply curve.
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D. Add 20 to both original coordinates, giving Q = 70 and P = 70.
❌ Not quite 😭 The 20-unit change is in the demand intercept, not automatically in both equilibrium coordinates. The new equilibrium must satisfy demand and supply together.
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Full explanation
- Step 1Initially, set 100 − Q = Q to obtain Q = 50 and P = 50.
- Step 2Higher software exports increase overseas demand for the domestic currency, changing demand to P = 120 − Q.
- Step 3Set 120 − Q = Q to obtain Q = 60 and P = 60.
- Step 4Because P measures the domestic price of the currency, its rise from 50 to 60 is an appreciation.
Practice 2: Comparative advantage from opportunity cost
Using the same resources, Country A can produce either 60 tonnes of wheat or 30 machines, while Country B can produce either 40 tonnes of wheat or 40 machines.
Which country has the comparative advantage in producing machines?
Choose one answer.
A. Country B, because one machine costs 1 tonne of wheat compared with 2 tonnes in Country A
✅ Correct! 😊 Correct. Country B gives up less wheat for each machine, so it has the lower opportunity cost and the comparative advantage in machines.
B. Country A, because it can produce more wheat
❌ Not quite 😭 This uses absolute wheat output, which does not establish comparative advantage in machines. The relevant comparison is wheat forgone per machine.
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C. Country B, only because it can produce more machines
❌ Not quite 😭 The selected country is right but the reasoning uses absolute advantage. Comparative advantage must be demonstrated by the lower opportunity cost.
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D. Neither country, because their production totals use different units
❌ Not quite 😭 Opportunity cost makes the alternatives comparable within each country. Calculating wheat forgone per machine permits the required comparison.
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Full explanation
- Step 1For Country A, one machine costs 60 ÷ 30 = 2 tonnes of wheat.
- Step 2For Country B, one machine costs 40 ÷ 40 = 1 tonne of wheat.
- Step 3Country B has the lower opportunity cost, so it has comparative advantage in machines.
Key terms for Unit 6: International Economic Issues (AS & A Level)
Models, uses, and boundaries
- The terms of trade divide the export-price index by the import-price index and multiply by 100
- The terms of trade divide the export-price index by the import-price index and multiply by 100. The terms of trade divide the export-price index by the import-price index and multiply by 100. Reversing the indices reverses the comparison.
- The current-account balance combines goods, services, primary income, and secondary income
- The current-account balance combines goods, services, primary income, and secondary income. The current-account balance combines goods, services, primary income, and secondary income. Each component keeps its recorded sign.
- Opportunity cost of X
- Opportunity cost of X divides Y forgone by X gained. Opportunity cost of X divides Y forgone by X gained. This ratio, rather than total output, supports a comparative-advantage comparison.
- Foreign currency
- Foreign currency equals domestic currency multiplied by the stated rate. Foreign currency equals domestic currency multiplied by the stated rate. First read the quotation so the multiplication matches the requested currency.
- The real exchange rate
- The real exchange rate multiplies the nominal rate by foreign prices divided by domestic prices. The real exchange rate multiplies the nominal rate by foreign prices divided by domestic prices. The quotation and both price levels must be identified first.
- The Gini coefficient
- The Gini coefficient divides the area between equality and the Lorenz curve by the area under equality. The Gini coefficient divides the area between equality and the Lorenz curve by the area under equality. It uses the whole distribution rather than one vertical gap.
- Per-capita income
- Per-capita income divides national income by population. Per-capita income divides national income by population. The result is an average and does not reveal how income is distributed.
- The debt-service ratio
- The debt-service ratio divides debt-service payments by export earnings and multiplies by 100. The debt-service ratio divides debt-service payments by export earnings and multiplies by 100. Export earnings provide the foreign-currency payment base.
Cambridge International AS & A Level Economics (9708) Unit 6 FAQ
How much of Cambridge International AS & A Level Economics (9708) does Unit 6 carry?
Cambridge International does not publish a per-unit weighting for this exam.
What is the first move on a International Economic Issues (AS & A Level) problem?
Currency demand P=100−Q and supply P=Q initially meet at Q=50, P=50.
Which relationships should I preserve?
Keep the software-export mechanism tied to the currency market: higher foreign demand for exports raises demand for the currency. For comparative advantage, calculate opportunity cost separately for each producer before choosing specialisation. The terms-of-trade index, current-account balance, and currency conversion use different inputs. The survey orders households from lowest to highest income before cumulative shares are plotted. Exchange-rate questions need a separate sequence: identify the regime, quotation, price levels, and trade-response condition. Development comparisons may use per-capita income, purchasing-power adjustments, HDI, or the Gini coefficient.
Which representations should I practice?
Practice moving among Currency quantity and Currency price graph, D1, D2, S labels, Currency quantity is horizontal and Currency price is vertical., Population share and Income share graph, Perfect equality, Lorenz curve, 50%, 20% labels, Population share is horizontal and Income share is vertical..
What error should I check before submitting an answer?
Check for Absolute output can distract from opportunity cost.; The quotation direction determines what a rise means.; Export and import price indices can be reversed.; A policy change under a fixed system can be confused with depreciation.; The 30-point vertical gap is not itself the Gini value.; Debt service can be divided by the wrong foreign-currency flow..
Evidence workshop
Continue from the free model into complete practice
The full unit guide continues with the chapter’s worked examples, figures, scoring tables, and answer checks.
- AS trade and exchange: connect direction and magnitude
- AS trade and exchange: draw and solve the model
- AS trade and exchange: build the argument
- International Economic Issues: connect the model
Full unit practice. Open the complete guide for the full evidence workshop and synthesis.
Related Cambridge International AS & A Level Economics (9708) unit guides
Cambridge International AS & A Level Economics (9708) Exam Guide & Review
The whole exam and its official unit sequence.01Basic Economic Ideas and Resource Allocation
Cambridge International does not publish a per-unit weighting for this exam.02The Price System and the Microeconomy (AS & A Level)
Cambridge International does not publish a per-unit weighting for this exam.03Government Microeconomic Intervention (AS & A Level)
Cambridge International does not publish a per-unit weighting for this exam.04The Macroeconomy (AS & A Level)
Cambridge International does not publish a per-unit weighting for this exam.05Government Macroeconomic Intervention (AS & A Level)
Cambridge International does not publish a per-unit weighting for this exam.How to study Cambridge International AS & A Level Economics (9708) Unit 6
Start with the organizing decision
Before solving, restate the decision in operational terms: The currency market uses currency quantity horizontally and its domestic price vertically.. Your first written move should be to Currency demand P=100−Q and supply P=Q initially meet at Q=50, P=50..
Practice the same idea in several representations
Rotate through Currency quantity and Currency price graph, D1, D2, S labels, Currency quantity is horizontal and Currency price is vertical., Population share and Income share graph, Perfect equality, Lorenz curve, 50%, 20% labels, Population share is horizontal and Income share is vertical.. Use each representation to practice The Reasons for International Trade: Absolute and Comparative Advantage and the Terms of Trade, Protectionism: Tools, Impact and Arguments, Current Account of the Balance of Payments, Exchange Rates: Floating Rates, Depreciation and Appreciation, Policies to Correct Imbalances in the Current Account, Policies to Correct Disequilibrium in the Balance of Payments (A Level), Exchange Rates: Fixed and Managed Systems, the Marshall-Lerner Condition and the J Curve (A Level), Economic Development and Indicators of Living Standards (A Level), Characteristics of Countries at Different Levels of Development (A Level), Relationship Between Countries at Different Levels of Development: Aid, Trade, Multinationals, Foreign Direct Investment and Debt (A Level), Globalisation, Economic Integration, Trade Creation and Trade Diversion (A Level), and explain what stays invariant when the surface form changes.
Turn each error into a repair check
After every attempt, audit the response for Absolute output can distract from opportunity cost.; The quotation direction determines what a rise means.; Export and import price indices can be reversed.; A policy change under a fixed system can be confused with depreciation.; The 30-point vertical gap is not itself the Gini value.; Debt service can be divided by the wrong foreign-currency flow.. Then redo only the first step that made the reasoning diverge, keeping units, direction, and model conditions visible.
Confirm current course details in the official Cambridge International syllabus for the 2026-2028 administration.
Where to go next
Return to the Cambridge International AS & A Level Economics (9708) to see every unit and plan your revision.