Real-World Examples | Oeconomica 
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Real-World Examples

Real-World Examples are extremely important for Part B of the Paper 1 question. To paraphrase the IB Economics guide, omitting a relevant real-world example guarantees that the student cannot score higher than the 1-3 mark band out of 15.

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Below is a list of real-world examples pertaining to international topics that are frequently tested. This is not a comprehensive list and if you feel that we have left out any important Real-World Examples please do not hesitate to suggest it using the "Contact Us" form. It is also important to note that the points presented under the subsection "Points of Discussion" is not an exhaustive list of evaluation points and should rather be used as guiding points to spark extensive evaluation. 

HL and SL 

Trade Protection

Tariff

Overview

France imposed a tariff of 3% on digital companies that earn a revenue greater than €750 million of which €25 million is in France.

Links

Points of Discussion

  • The tariff is expected to generate around €400 million per year for France

  • About 30 companies are expected to pay the tariff most of which are from the United States

  • The Trump Administration is planning to introduce tariffs of their own off 100% on imported french wine and champagne

Quota

Overview

China has set an quota of 40,203 tonnes on wool imports from Australia

Links

Points of Discussion

  • The import quota was increased from a year earlier when it was set at 38,288 tonnes

  • It contradicts reports from Australian authorities accusing China of engaging in a trade war

  • Australian wool accounts for approximately 80% of Chinese wool imports

Production Subsidy

Overview

The United States has provided over $2 Billion in subsidies for the construction of Electric Vehicle plants at the end of 2021

Links

Points of Discussion

  • The subsidy will be extremely successful in increasing production with companies such as Ford setting a goal to create 600,000 cars by the end of 2023 per year

  • Most USA state governments are also implementing their own subsidies alongside the federal governments subsidy

  • The subsidy is greater than those provided in the previous four years combined

Export Subsidy

Overview

The Indian government has provided an export subsidy for sugar producers on its transport worth ₹1,375 crores in 2018

Points of Discussion

  • 5 Million tonnes of sugar are expected to be exported between October of 2018 to September of 2019

  • Their are state elections coming up in mid-2019 suggesting their could be a political agenda to the policy

Links

Trading Blocs

Free Trade Area

Overview

54 of the 55 African countries partake in the African Continental Trade Agreement founded in March of 2018

Links

Points of Discussion

  • Access to larger market of 1.27 billion people

  • It will reportedly increase regional income by 7% and lift 30 million people out of extreme poverty by 2035

  • Exports in African nations are expected to increase by $560 billion

Monetary Union

Overview

The European Union (EU) is a political and economic union consisting of 27 member states which are primarily located in Europe. It was founded in 1993 and has a total population of approximately 47 million people

Links

Points of Discussion

  • There is a common central bank named the European Central Bank (ECB) and it’s solely responsible for the monetary policy of 19 out of 27 nations.

  • When Greece underwent a deep recession in 2009 inflexibility of the ECB was a primary cause, however, it was the EU which bailed them out by providing €100 billion in debt relief

  • EU countries must meet a “convergence criteria” to adopt the euro as their currency. 8 of the 27 countries don’t meet the criteria suggesting that the Euro is a stable currency in the foreign exchange market

Exchange Rate

Depreciation

Overview

In August of 2015 the People’s Bank of China (PBOC) devalued its currency by 3%

Links

Points of Discussion

  • Since 2005, China’s currency has appreciated 33% against U.S. dollar

  • The PBOC claimed that the devaluation was part of its reform to move towards market based policy

Appreciation

Overview

China’s currency rapidly appreciated from 1981 till 1996 from 1.92 yuan for a dollar to 8.28 yuan for a dollar

Points of Discussion

  • American companies could manufacture goods for cheap in China driving them into the country

  • However, in 2005, the Yuan reversed course and appreciated by 33%

Links

Economic growth or economic development strategies

Export Promotion

Overview

South Korea’s Real GDP per capita grew from $158 to $13,403 between 1960-1996 which has been largely credited to the use of export substitution

Links

Points of Discussion

  • South Korea implemented a free market economy led by exports

  • Absolute poverty fell from 40.9% in 1965 to 4.6% in 1984

  • The share of exports in GDP has tripled in 25 years

Economic integration

Please refer to the section titled “Trading Blocs” on this webpage

Policies to correct current account deficit

Expenditure Switching

Overview

During the 2008-09 financial crisis, Latvia, amongst other things, reallocated 3% of its food expenditure from imported goods to domestic goods

Links

Points of Discussion

  • On Average domestic goods were 30% cheaper

  • Within 2 years 20% of trade deficit was reduced and GDP growth resumed suggesting the policy was successful

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