Economics · May / June 2026 · Paper 21 · Question 4

0455

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Economists identify global cities as those with large populations, many multinational companies (MNCs), global financial markets and significant involvement in international trade. Shanghai, the largest city in China, is one of these cities. Nearly a thousand MNCs, including commercial banks, have their headquarters there. The city also has the world’s biggest container port which exports and imports large volumes of goods.

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4(a)[2]
Identify two services that commercial banks provide for their customers.
loans (1)
looking after documents/ valuables (1)
accept deposits/current accounts/withdrawal/transferring money/making payments/debit cards/cheque book (1)
provide financial advice (1)
provide foreign exchange (1)
provide insurance (1)
savings (1)
2 If more than two services are given, consider the first three.
4(b)[4]
Explain two reasons why a firm may produce in more than one country. Logical explanation which might include:
Access to natural resources (1)
at a lower price / unavailable at home (1).
Access to a growing/larger market / increased demand in other countries / closer to market (1)
opportunity to earn high revenue/profits (1).
Increase output (1)
leading to economies of scale (1)
Access to skilled labour (1)
high quality output (1).
Lower wages (1)
lower costs of production (1).
Tax rates may be low / avoid tariffs/trade barriers (1)
increase post-tax income (1).
Legislation may be less strict (1)
which e.g. could reduce need for high quality working conditions (1).
Could spread risk of falling demand across two countries (1)
avoid overdependence on one market (1). 4 One mark each for each of two reasons identified and one mark for each of two explanations. If more than two reasons are given, consider the first three.
4(c)[6]
Analyse the ways a government could increase its country’s exports. Coherent analysis which might include:
Lower the exchange rate (1)
reduce price of exports / increase international competitiveness (1)
increase demand for exports (1)
Provide subsidies (1)
to lower cost of production (1)
can afford better technology / capital goods / research & development / innovation / improve quality (1)
Improve education / training (1)
raise productivity (1)
increase quality (1)
Promote / advertise exports internationally (1)
to gain more recognition / develop brand name (1)
Deregulate the market (1)
reduce barriers to entry (1)
increase competition (1)
Improve infrastructure (1)
easier to access foreign markets (1)
Decrease income taxes (1)
increase incentive to work (1)
6 Maximum 3 marks for only identification Accept but do not expect:
Raise personal income tax / domestic indirect tax (1)
reduce demand for domestic products (1)
encourage firms to export more (1).
Remove export quota / legislations on exports (1)
less quantitative restriction on total amount of exports (1)
increase ability to export (1)
More free trade agreements (1)
leading to other countries putting lower tariffs/quotas on imported goods (1)
4(d)[8]
Discuss whether or not a city would benefit from an increase in the size of its population. In assessing each answer, use the table opposite. Coherent discussion which might include: Why it might:
may be more workers
larger market
may attract MNCs
more local tax revenue Why it might not:
may be overcrowding
may be pollution
may be shortage of housing / schools / hospitals
may be more dependents. Level Description A reasoned discussion which accurately examines both sides of the economic argument, making use of economic information and clear and logical analysis to evaluate economic issues and situations. One side of the argument may have more depth than the other, but overall both sides of the argument are considered and developed. There is thoughtful evaluation of economic concepts, terminology, information and/or data appropriate to the question. The discussion may also point out the possible uncertainties of alternative decisions and outcomes. 6–8 A reasoned discussion which makes use of economic information and clear analysis to evaluate economic issues and situations. The answer may lack some depth and development may be one-sided. There is relevant use of economic concepts, terminology, information and data appropriate to the question. 3–5 Guidance Level Description There is a simple attempt at using economic definitions and terminology. Some reference may be made to economic theory, with occasional understanding. 1–2 A mark of zero should be awarded for no creditable content.

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