The international economy

The international economy is a core component of the AQA A-Level Economics specification, focusing on the economic interactions between countries. This topic explores why nations trade, the benefits and costs of globalisation, and the role of international institutions like the World Trade Organization (WTO), International Monetary Fund (IMF), and World Bank. You will examine trade patterns, protectionism, exchange rates, and the balance of payments, all of which are essential for understanding how the UK economy fits into the global system. Mastery of this topic is crucial for evaluating government policies and real-world economic events, such as Brexit or trade wars.

This topic builds on microeconomic concepts of specialisation and comparative advantage, extending them to a global scale. You will learn to analyse the impact of trade on economic growth, inequality, and environmental sustainability. The international economy also covers macroeconomic policy challenges, such as managing exchange rates and correcting balance of payments imbalances. Understanding these concepts allows you to critically assess arguments for and against free trade, and to evaluate the effectiveness of policies like tariffs, quotas, and subsidies.

In the A-Level exams, questions on the international economy often require you to apply economic models to real-world scenarios, such as the impact of a depreciation of the pound on UK exports and inflation. You will need to use diagrams (e.g., comparative advantage, J-curve) and evaluate both short-run and long-run effects. This topic is highly synoptic, linking to microeconomics (e.g., market failure from trade) and macroeconomics (e.g., fiscal policy in an open economy). A strong grasp of the international economy will help you achieve top marks in essays and data response questions.