Cambridge IGCSE Economics 0455 — 2011 May/June Paper 3 · Variant 3

1 (a) State two influences on the demand for a country’s exports. .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... ......................................................................................................................................[2] (b) Identify two possible reasons why the Chinese savings ratio may fall in the future. .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... ......................................................................................................................................[2] (c) (i) What is meant by cyclical unemployment? .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. ..............................................................................................................................[2] (ii) Explain one consequence of unemployment referred to in the extract. .................................................................................................................................. .................................................................................................................................. 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.................................................................................................................................. .................................................................................................................................. ..............................................................................................................................[3] (d) (i) Describe the relationship between unemployment and inflation shown in Table 1. .................................................................................................................................. ..............................................................................................................................[1] (ii) Explain one possible reason for the relationship described in (d) (i). .................................................................................................................................. 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.................................................................................................................................. .................................................................................................................................. .................................................................................................................................. ..............................................................................................................................[3] (e) Discuss what factors are likely to influence whether unemployment will rise in China in the future. .......................................................................................................................................... .......................................................................................................................................... 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.......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... ......................................................................................................................................[7] [Total: 20] The extract ‘Japan’s population problem’ will be needed for this question.

Mark scheme: 1 (a) 1 mark each for any two valid influences, e.g. • exchange rate • price • quality • incomes abroad • changing tastes and fashion • trade restrictions (maximum of 1 mark even if more than one trade restriction identified) • foreign substitutes or complements. [2] (b) 1 mark for each of two reasons, e.g. • state provision of health care may increase • state provision of pensions may increase • job security may increase • a change in income • an improvement in the state education system • a rise in employment/fall in unemployment • a rise in the inflation rate • lower interest rates. [2] (c) (i) 2 marks for unemployment caused by a lack of aggregate/total demand. 1 mark for unemployment caused by a lack of demand or people willing and able to work being without jobs or due to trade cycle or recession or boom or slump. [2] (ii) 1 mark for identifying a consequence, one from: • fall in potential output/lower economic growth • lost tax revenue • rise in savings • change in inflation rate. Up to 2 marks for explanation, e.g. • If people are out of work they are not making goods and services and that potential output is lost for all time. • Income will fall and so spending will fall leading to a decline in direct and indirect tax revenue. • If they save more, spending will fall further which can cause even more unemployment. • If fewer people are unemployed this may increase costs of production and increase total demand. Note: consequence must be referred to in the extract. [3] IGCSE – May/June 2011 0455 33 (d) (i) Unemployment falls whilst inflation rises or unemployment rises whilst inflation falls or there is an inverse relationship described (1). (The question only requires a description of the relationship and not the trend shown but the answer must imply an inverse relationship.) [1] (ii) Either: as unemployment changes, incomes change (1), spending/demand changes (1), changes in demand are likely to encourage firms to change their prices (1), and so influence demand-pull inflation (1). Note: maximum of 3 marks but final link is needed to achieve the third mark. Or: as unemployment changes, a shortage or surplus of workers may develop (1). This may alter wage rates (1), and change the costs of production (1) and so influence cost- push inflation (1). Note: maximum of 3 marks but final link is needed to achieve the third mark. [3] Note: OFR – if in (d)(i) a candidate has described a direct relationship between unemployment and inflation, this may change the demand for the countries’ products and so alter the number of people employed/unemployed. Note: OFR – own figure rule which means that a candidate cannot be penalised twice for making the same mistake. (e) 1 mark for identification of each factor, up to a maximum of four, e.g. • level of aggregate demand/economic activity • rise in international competitiveness • consumer confidence • change in government policy influencing aggregate demand, e.g. taxation • change in government policy influencing aggregate supply, e.g. education/training • skills of workers • technological change • mobility of workers • relative cost of labour • level of inflation. Up to 3 marks for discussing the factors, e.g. • If aggregate demand falls, cyclical unemployment will rise. • An increase in the skills of workers may reduce structural unemployment. • Technological change will require workers to learn new skills and may reduce jobs in some industries. • An increase in geographical and occupational mobility should reduce unemployment. Note: up to 3 marks for strong discussion of one factor. [7] IGCSE – May/June 2011 0455 33

More questions on Employment and unemployment

2 (a) Calculate the estimated percentage fall in the Japanese population from 2008 to 2050. .......................................................................................................................................... ......................................................................................................................................[1] (b) Identify: (i) one cause of a decline in population size not mentioned in the extract .................................................................................................................................. ..............................................................................................................................[1] (ii) two possible causes of the change in Japan’s death rate. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. .................................................................................................................................. ..............................................................................................................................[2] (c) What is meant by the labour force? .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... ......................................................................................................................................[2] (d) Explain, using a demand and supply diagram, the likely effect of an ageing population on the price of residential care. .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... ......................................................................................................................................[4] (e) Explain why raising the retirement age would be expected to raise tax revenue. .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... .......................................................................................................................................... ......................................................................................................................................[4] Question 2 (f) is on the next page

Mark scheme: 2 (a) 25% [1] (b) (i) 1 mark for either (net) emigration or a rise in the death rate (such as earthquake). Do not accept people marrying later or decline in number of marriages. [1] (ii) 1 mark each for any two valid causes of a falling death rate, e.g. • a healthier lifestyle, e.g. better diet, more exercise • advances in medical care • better housing • improved working conditions • less pollution. [2] (c) 2 marks for those in work and those seeking work, or employed and unemployed, or those who are economically active. 1 mark for those working/workers. [2] (d) 1 mark for correct labels (D, S, P and Q). 1 mark for shift of the demand curve to the right. 1 mark for correct equilibriums (indicated by lines only is sufficient). 1 mark for mentioning that the quantity bought and sold will be likely to rise. 1 mark for mentioning that price will be likely to rise. Note: maximum mark of 4. [4] (e) It would increase those who are working (1). Those affected are likely to receive higher incomes (1) and so pay more income/direct tax (1) and would spend more (1) and so pay more indirect taxes (1). Also reward a business paying more direct tax in the form of corporation tax (1) as a result of increased output/expenditure/profit (1). Note: maximum mark of 4. [4] IGCSE – May/June 2011 0455 33 (f) 1 mark for identification of each piece of information, up to a maximum of three, e.g. • size of population relative to the optimum size (candidates do not need to refer to this term) • current birth rate • current death rate • average age of population • net migration figure • employment level • resources available • short and long term effects. Up to 3 marks for discussing how the information would aid the assessment, e.g. a rise in a country’s birth rate would benefit its economy if: • the population is currently below the optimum level • the country has a labour shortage • the country is well endowed with resources other than labour • the population is ageing and declining • a short term reduction in the size of the labour force is offset by a long term increase in it. Note: up to 3 marks for strong discussion of one piece of information. Note: a maximum of 3 marks for just discussing a rise in the birth rate and ignoring the information needed. [6]

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