O-LevelCommerceGlobal trade7100/22 · Oct/Nov 2021 · Q513 Marks

Fig. 5.1 shows country A's trading figures from 2000–2020. [Figure 5.1] Use Fig. 5.1 to help you answer the following questions.

(a)(i)What is meant by a trade deficit?[1]
(a)(ii)Which year has the largest trade surplus?[1]
(b)Which of these statements about sea transport are true and which are false? TRUE FALSE A bill of lading is used as a shipping document Cargo liners operate on fixed routes and on fixed timetables Container ships are suitable for carrying coal[3]
(c)The government of country A wants to reduce the trade deficit. It may use import quotas or ask banks to provide loans to exporters. Discuss each of these two options. Which would you recommend? Give reasons for your answer.[8]

This question uses a diagram from the original paper, which isn't shown here. Open the full paper from the past papers archive to see it.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2021). The mark or mark type is shown in brackets.

[1] The amount by which the value of a country's imports exceeds the value of its exports/imports greater than exports
[1] 2000/2001/2002
[3] 1 mark for each correct answer
A bill of lading is used as a shipping document TRUE
Cargo liners operate on fixed routes and on fixed timetables TRUE
Container ships are suitable for carrying coal FALSE
[8] Level Mark Description
3 7-8 The candidate is able to offer a thorough evaluation of whether the government should be using import quotas or asking banks to provide loans to exporters in order to reduce the trade deficit.
2 5-6 Candidate offers a satisfactory analysis of the advantages and/or disadvantages of using import quotas and/or bank loans to reduce the trade deficit without evaluation.
1 1-4 Candidate demonstrates some knowledge and understanding, with application to using import quotas and/or bank loans to reduce the trade deficit.
0 0 No creditable response.
Note: Can obtain up to 7 marks for discussing one option.
An import quota is a limit on the total quantity of a product that can be supplied to a market.
Quotas: Quotas will reduce the need to import goods so helping the balance of trade
They will help to stimulate home production so the country is less dependent on foreign goods being imported
They can lead to higher prices for consumers as the supply of goods is limited
Bank loan: A bank loan provides medium or long-term finance. The bank sets the fixed period over which the loan is provided, the rate of interest and the timing and amount of repayments.
The exporters will use the loan for investment to stimulate production of exports
The government will negotiate better interest rates for exporters
The government will encourage banks to lend to exporters even though it is a higher risk
Evaluation: Country A will encourage banks to provide loans to exporters to increase exports and reduce its trade deficit. The government may have to guarantee the loans because the banks think export is risky. Quotas will stop so many imports but the exporting countries may retaliate and refuse to buy goods from country A. Country A has a big deficit so it should do both.