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A Level · Cambridge (CIE) · 9708

Aid, trade, investment and multinational companies

Aid, trade, investment and multinational companies: build the core model, apply it to evidence and qualify conclusions where outcomes depend on context.

Cambridge International AS & A Level Economics 9708 · 2026–2028 Version 2 / 2029 Version 1 · 11.5

9708 section 11.5; A Level. Checked against Cambridge's 2026–2028 Version 2 (latest version published December 2025) and 2029 Version 1 (published September 2026). Cambridge states that neither version has significant changes affecting teaching. Always follow the syllabus for the candidate's examination year.

Before you begin

    Work on paper. Try each question before revealing help, and explain why your method works.

    Quick readiness check

    What is one reason a host country may assess a multinational company’s local supplier links?

    What you will learn

    • Compare forms, reasons, effects and importance of international aid
    • Analyse trade and investment relationships
    • Evaluate multinational-company activities and consequences

    Core model and terms

    Aid can be humanitarian, technical, grant-based, concessional or tied to purchases; donors may respond to emergencies, strategic aims or development needs. Effects depend on timing, governance, local capacity, conditions and whether projects match priorities. Trade and investment can widen markets, provide capital and spread knowledge, but gains and costs differ across workers, firms and regions.

    Apply and evaluate

    A multinational company operates in more than one country and may invest, produce, source and sell across borders. It can create jobs, skills, tax revenue and technology links; it can also repatriate profits, exercise bargaining power, displace local firms or create environmental costs. Evaluate actual linkages, wages, tax arrangements, competition, labour standards and environmental rules instead of assuming every MNC benefits or harms a host country.

    Pause and explain

    Which statement best applies aid, trade, investment and multinational companies?

    Put the idea to work

    Worked example

    An aid-funded irrigation project raises farm output, but its equipment must be bought from the donor country. Give one potential benefit, one concern and evidence needed to judge the project.

    Show the worked solution
    1. Irrigation may raise productivity and resilience
    2. Tied procurement can increase cost or limit local choice
    3. Compare project outcomes, maintenance, local access, alternatives and the aid terms

    Answer Irrigation may raise productivity and resilience → Tied procurement can increase cost or limit local choice → Compare project outcomes, maintenance, local access, alternatives and the aid terms

    Try a topic test

    Choose Easy, Normal or Difficult. Save your answers and open worked review after finishing.

    Test this topic →

    From guided practice to a new situation

    Write your answer and reasoning first. Use a hint only if you are stuck. The model solution is for self-checking; your written work is not automatically marked.

    1 · Guided

    An aid-funded irrigation project raises farm output, but its equipment must be bought from the donor country. Give one potential benefit, one concern and evidence needed to judge the project.

    Give me a hint

    Consider output, aid conditions, local capacity and who receives the gain.

    Compare my reasoning
    1. Irrigation may raise productivity and resilience
    2. Tied procurement can increase cost or limit local choice
    3. Compare project outcomes, maintenance, local access, alternatives and the aid terms

    Irrigation may raise productivity and resilience Tied procurement can increase cost or limit local choice Compare project outcomes, maintenance, local access, alternatives and the aid terms

    Look for these in your work

    • Irrigation may raise productivity and resilience
    • Tied procurement can increase cost or limit local choice
    • Compare project outcomes, maintenance, local access, alternatives and the aid terms
    2 · Independent

    A multinational trains local workers and buys from local suppliers. Explain one possible development benefit and one condition needed for it to persist.

    Give me a hint

    Trace a local skill or supplier linkage beyond the company’s own payroll.

    Compare my reasoning
    1. Training can raise transferable skills and supplier orders can deepen local links
    2. Benefits may persist if workers and firms can use those capabilities after the contract or investment changes
    3. Check wages, competition and training access

    Training can raise transferable skills and supplier orders can deepen local links Benefits may persist if workers and firms can use those capabilities after the contract or investment changes Check wages, competition and training access

    Look for these in your work

    • Training can raise transferable skills and supplier orders can deepen local links
    • Benefits may persist if workers and firms can use those capabilities after the contract or investment changes
    • Check wages, competition and training access
    3 · Transfer

    A foreign-owned factory exports most output but repatriates profits. Explain why FDI can raise productive capacity without all income staying in the host economy.

    Give me a hint

    Separate the location of production from the ownership of returns.

    Compare my reasoning
    1. The factory adds local capital and output
    2. Foreign owners receive a share of profits
    3. Net national income and local spillovers depend on wages, taxes, supplier links and reinvestment

    The factory adds local capital and output Foreign owners receive a share of profits Net national income and local spillovers depend on wages, taxes, supplier links and reinvestment

    Look for these in your work

    • The factory adds local capital and output
    • Foreign owners receive a share of profits
    • Net national income and local spillovers depend on wages, taxes, supplier links and reinvestment
    4 · Transfer

    Why should aid effectiveness be assessed by more than the amount committed?

    Give me a hint

    Compare announced resources with delivery, outcomes and who benefits.

    Compare my reasoning
    1. Commitments may not be fully disbursed or maintained
    2. Projects can miss local priorities
    3. Measure access, outputs, long-run outcomes, costs and distribution

    Commitments may not be fully disbursed or maintained Projects can miss local priorities Measure access, outputs, long-run outcomes, costs and distribution

    Look for these in your work

    • Commitments may not be fully disbursed or maintained
    • Projects can miss local priorities
    • Measure access, outputs, long-run outcomes, costs and distribution

    Common mistakes

    • Assuming aid, trade or multinational investment has the same effect in every country or treating output gains as proof that gains are evenly shared.
    Recall without your notes

    What can you explain now?

    What is one reason a host country may assess a multinational company’s local supplier links?

    Compare with the explanation

    They show whether investment creates activity and capabilities beyond the firm itself

    Supplier linkages can spread income, demand and knowledge into domestic firms.

    After trying it yourself, choose your next review. This is your self-assessment.

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    Make it stick

    Before moving on, explain the central idea in aid, trade, investment and multinational companies and state one condition that could change its effect.

    If you needed the solution, close it and solve the problem again from a blank page. A correct answer is stronger when you can explain the reason for each step.

    Keep learning Economics

    Course scope and assessment

    Fifty-nine original lessons map all 53 Cambridge International AS & A Level Economics 9708 sections: all 29 AS sections (1.1–6.5) and all 24 A Level sections (7.1–11.6), covering all 253 numbered syllabus objectives. Six complex sections are split across lessons to give their objectives room for teaching and practice. Each mapped lesson includes original explanations, a worked example, concept checks and guided, independent and transfer/application practice with worked steps and answers. Topic coverage is complete for the listed syllabus versions, but this is not full-paper preparation. Practice is self-checked, not Cambridge-marked; extended-response grade evidence, cumulative timed-paper practice and human subject-teacher review remain outstanding.

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