Economic growth — Paper 2 · IGCSE Economics 0455

6 At the start of 2015, dockworkers on the west coast of the USA took industrial action in the form of a go-slow, disrupting exports and imports. This was coordinated by their trade union. Unions in the USA are declining in strength, particularly in the private sector. Most workers in the USA work in the private sector. (a) Identify two aims of a trade union. [2] (b) Explain two reasons for a decline in trade union membership. [4] (c) Analyse why someone may switch from working in the public sector to working in the private sector. [6] (d) Discuss whether a decrease in imports would increase a country’s economic growth rate. [8]

20 marks

Mark scheme: 6(a) Identify two aims of a trade union. 1 mark each for each of two aims identified: • higher wages • increased job security • better working conditions • provision of benefits • lobbying the government • reduction in discrimination 2 6(b) Explain two reasons for a decline in trade union membership. 1 mark each for each of two reasons identified: • lower employment • increase in subscriptions • government legislation • firms’ discouragement • change in pattern of employment • less efficient trade unions/decline in strength • greater reluctance to take industrial action • more satisfied with e.g. working hours and conditions. 1 mark each for each of two reasons explained: • lower employment will mean that there will be fewer workers to join trade unions/may make those still in employment be concerned that joining a trade union may increase the risk of being made redundant • workers may be reluctant to pay increased subscriptions • government legislation may reduce the power of trade unions • firms may make it clear that they will not employ trade union members • fewer workers in the private sector tend to be union members • workers would expect less advantages from joining a trade union • do not want to be asked to e.g. strike as earnings could be lost • workers may have better relations with employers. 4 Question Answer Marks Guidance 6(c) Analyse why someone may switch from working in the public sector to working in the private sector. Jobs in the public sector may be declining (1) so a public sector worker may fear being made redundant (1) so private sector may provide more job security (1). Wages in the private sector may be higher/increasing more than those in the public sector (1) higher wages will increase living standards (1) enabling workers to e.g. enjoy better healthcare (1). May want to work in a smaller organisation (1) may think labour relations will be better (1). Non-wage factors may be better in the private sector (1) examples e.g. pensions (1) greater promotion chances (1), Working hours may have been reduced/be shorter (1). 6 Note: maximum of 3 marks for a list-like approach. 6(d) Discuss whether a decrease in imports would increase a country’s economic growth rate. Up to 5 marks for why it might: Lower imports may be the result of an increase in the international competitiveness of domestic products (1). Imports may be replaced by domestic products (1) total demand would increase (1) this may increase output (1) infant industries may be able to expand (1) domestic employment may increase (1). Up to 5 marks for why it might not: Imports may decline due to consumers spending less in total (1) they may not be replaced by domestic products (1). If imports of raw materials or capital goods fall (1) there will be fewer resources available (1) to make domestic output (1). A decrease in imports will reduce incomes of other countries (1) may reduce demand for the country’s exports (1). Lower imports may push up the exchange rate (1) raise the price of exports (1) if both imports and exports fall output may be unchanged or even lower (1). If lower imports are the result of the imposition of trade restrictions (1) there may be retaliation (1) reducing the country’s exports (1). 8

This question in 0455/22 Feb/March 2017

4 In 2012 oil was discovered in Kenya, but in 2014 an American firm stopped its plans to explore for oil in the Arabuko Sokoke forest in the country. The relative sizes of Kenya’s primary, secondary and tertiary sectors are changing. The amount of capital goods in the country is also increasing. (a) Define the ‘secondary sector’ and give an example. [2] (b) Explain two benefits that an economy may gain as a result of the discovery of oil on its land. [4] (c) Analyse why the social costs of oil extraction may be greater than the private costs. [6] (d) Discuss whether a country would benefit from devoting more resources to producing capital goods. [8]

20 marks

Mark scheme: 4(a) Define the ‘secondary sector’ and give an example. Manufacturing/turning raw materials into goods (1) e.g. car production, house building (1). 2 4(b) Explain two benefits that an economy may gain as a result of the discovery of oil on its land. 1 mark each for each of two benefits identified: • increase output / income • increased employment / lower unemployment • improved current account position / higher exports • increased tax revenue 1 mark each for each of two explanations given: • the output of oil will contribute to the country’s GDP / increase economic growth • better quality of life / standard of living • jobs will be created extracting/processing the oil • oil may be exported / less oil imported • oil may be taxed; higher output and higher incomes will increase tax revenue 4 4(c) Analyse why the social costs of oil extraction may be greater than the private costs. Private costs are the costs to the oil firms (1) e.g. cost of operating an oil rig (1). Social costs are private costs plus external costs (1) that affect everyone (1). External costs are likely to exist (1) firms will not take these into account (1) e.g. air pollution, water pollution, reduction in fertility of nearby land (maximum 2 marks for relevant examples). 6 Maximum of 3 marks for a list-like approach. Question Answer Marks Guidance 4(d) Discuss whether a country would benefit from devoting more resources to producing capital goods. Up to 5 marks for why it might: May increase economic growth (1) more capital goods will enable more goods and services to be produced (1) more output may raise living standards (1) increase employment (1). May reduce costs of production (1) prices fall (1) new capital goods may incorporate advanced technology (1) lower average costs may make products more internationally competitive (1) improve current account position (1). May be no opportunity cost (1) if they are unemployed resources (1). Up to 5 marks for why it might not: May involve an opportunity cost (1) example (1) may have to switch resources from producing consumer goods (1) lower living standards in the short run (1) may result in fewer jobs / higher unemployment (1) this will be structural unemployment (1). There may be no need for more capital goods (1) there may be no demand for extra output (1) existing capital goods may be idle (1). 8 A response may develop a mixture of relevant points to achieve up to 5 marks on either side. Maximum of 2 marks on each side of the discussion for a list-like approach.

This question in 0455/21 May/June 2017

6 Living standards have risen in a variety of ways in recent decades. Between 1990 and 2015, more than 2.5 billion people in the world gained access to improved water and the proportion of undernourished people declined from 24% to 13%. Countries have made different rates of progress and these have been reflected in their Human Development Index (HDI) rankings. (a) Define the ‘Human Development Index’. [2] (b) Explain why the concept of opportunity cost is important in deciding how to allocate resources. [4] (c) Analyse how a reduction in the rate of interest could reduce poverty. [6] (d) Discuss whether rapid economic growth always increases living standards. [8]

20 marks

Mark scheme: 6(a) Define the ‘Human Development Index’. A measure of living standards/quality of life (1) includes income per head, education and life expectancy (two of these three) (1) calculated by the UN (1). 2 6(b) Explain why the concept of opportunity cost is important in deciding how to allocate resources. Opportunity cost is the (next) best alternative (1) forgone (1) in deciding to use resources to produce one product (1) not able to produce another product (1) example (1) have to use resources to produce products in high demand (1) in the most efficient way (1). 4 6(c) Analyse how a reduction in the rate of interest could reduce poverty. • A lower cost of borrowing (1) may encourage people to take loans (1) increase consumer spending (1) increase total demand (1) encouraging firms to expand (1) • It may increase employment (1) raise people’s incomes (1) • May lower the burden of debt/make it easier to repay loans (1) may enable the poor to borrow (1) to educate their children (1) set up a business (1) which can provide an income (1). 6 Maximum of 3 marks for a list-like approach. Question Answer Marks Guidance 6(d) Discuss whether rapid economic growth always increases living standards. Up to 5 marks for why it might: • Higher income (1) will enable people to enjoy more goods and services (1) may reduce absolute poverty (1) with people having access to basic necessities (1) • Likely to increase tax revenue (1) enable the government to spend more on healthcare (1) raise life expectancy (1) • spend more on education (1) raise job prospects (1) • may spend more on the environment (1) reduce pollution (1) Up to 5 marks for why it might not: • There are other influences on living standards (1) example (1) • Growth may be unevenly distributed (1) not everyone may benefit (1) • Average living standards may rise but some people may suffer a fall in living standards (1) if income is unevenly distributed (1) it may not benefit those living in poverty (1) • The extra products provided e.g. defence (1) may not provide satisfaction to consumers (1) • Producing more may involve longer working hours (1) reducing leisure hours (1) working longer hours/working more intensely may increase stress (1) endangering people’s health (1) • Increases in output may damage the environment (1) e.g. forests being cut down/pollution created (1) 8 A response may develop a mixture of relevant points to achieve up to 5 marks on either side. Maximum of 2 marks on each side of the discussion for a list- like approach.

This question in 0455/23 May/June 2017

7 Despite encouragement from central banks, in 2015 some commercial banks were still reluctant to lend, especially to the poor. Attracting more lenders and borrowers would have allowed commercial banks to expand and employ more workers. A rise in employment would make more use of a country’s labour force. Over time, the size of a country’s labour force is likely to change. (a) Identify two ways in which the expenditure patterns of the poor and the rich are different. [2] (b) Explain two reasons why a commercial bank may prefer to lend to the rich rather than to the poor. [4] (c) Analyse the effects that an increase in the labour force will have on an economy. [6] (d) Discuss whether providing loans to the poor will reduce poverty. [8]

20 marks

Mark scheme: 7(a) Identify two ways in which the expenditure patterns of the poor and 2 the rich are different. The rich spend more / the poor spend less (1). Poor spend a higher proportion on basic necessities / needs e.g. food (1) rich spend a higher proportion on luxuries / wants (1). Poor spend a higher proportion (1) of their income than the rich (1) or the reverse argument. 7(b) Explain two reasons why a commercial bank may prefer to lend to the 4 rich rather than to the poor. 1 mark each for each of two reasons identified: • greater expectation that they will repay • greater collateral • rich may borrow more / more profitable • it takes a longer time for the poor to repay loans. 1 mark each for each of two explanations of the reasons: • rich will have more income/wealth to repay • rich will have more assets to sell if necessary • more interest can be earned from lending large sums • the poor have less income with which to repay. 7(c) Analyse the effects that an increase in the labour force will have on an 6 economy. An increase in the labour force will increase the quantity of resources (1) increase productive potential (1) enable more products to be produced (1) raise economic growth (1). An increase in the labour force may reduce inflation pressure (1) enable supply to increase to match higher demand (1). An increase in the labour force may increase total wages paid (1) increasing total spending/demand (1) causing demand-pull inflation (1). An increase in the labour force available may reduce wages (1) reducing cost-push inflation (1). An increase in the labour force may increase employment (1) if the number of jobs available increases (1) increasing income tax revenue for the government (1). If not employed, will increase unemployment rate (1) higher spending on benefits (1). 7(d) Discuss whether providing loans to the poor will reduce poverty. 8 Up to 5 marks for why it might: Loans will enable the poor to buy more basic necessities (1) e.g. housing, food, clothing (1) reduces absolute poverty (1). Loans will enable the poor to spend more on education/training (1) increase their skills (1) increase the chances of them gaining a job (1) increase wage rate (1) increase education of children (1) reduce poverty in the future (1). Loans will enable the poor to set up small businesses (1) become entrepreneurs (1) receive income/profit (1) may employ other previously poor people (1) reduce unemployment (1). Loans may enable the poor to spend more on healthcare (1) raising living standards (1). Up to 5 marks for why it might not: Loans may be spent on items that do not increase earning potential (1) e.g. cigarettes (1). The poor may get into debt / may be unable to repay the loan (1) lose their collateral/home (1). Paying interest (1) may reduce the ability to buy basic necessities (1) high interest rates (1) may be charged to the poor (1). Loans may not be large enough (1) to pay for e.g. education/training (1). Loans may not be a long-term solution to poverty (1) only improving living standards in the short-term.

This question in 0455/21 Oct/Nov 2017

1 Changes in the global balance of economic power In 2014, global Gross Domestic Product (GDP) stood at US$78 000 billion. A year later it had increased to US$80 730 billion. In the past, countries such as the USA and Germany might have been expected to have made the largest contribution to the increase in GDP. China accounted for 20% of the increase in world output in 2015. China is set to become the largest economy. It is becoming a stronger competitor in a number of markets. This increased price competitiveness is the result of a number of factors including maintaining a low exchange rate, providing subsidies to a number of industries and increased labour productivity. However, in 2015 the Chinese Government was considering whether to reduce the size of the country’s steel industry, possibly by cutting the subsidy it received. Fig. 1 shows how the market for steel might be affected by such a change. price of steel S2 S1 P2 P1 D1 O Q2 Q1 quantity of steel Fig. 1 The market for steel in China in 2015 Some developed countries have been struggling recently. For example, Australia has seen its economic growth rate declining. To try to increase domestic economic activity the Reserve Bank of Australia has cut interest rates. Developing and emerging economies’ economic growth rates are increasing. In Africa, this is in part because of the discovery and exploitation of oil and mineral resources. These countries have different exchange rate systems and have different records of success in attracting multinational companies. Many African countries use protectionist measures but some are moving towards free trade. In most developing and emerging economies the birth rate is falling. The impact of this change is influenced by the relative size of the fall. For instance, Nauru is one of the smallest countries in the world having a population of only 10 000. Its birth rate fell from 26 to 25 in 2015. (a) Identify, from the extract, two monetary policy measures. [2] (b) Explain two causes of a fall in the birth rate. [4] (c) Calculate, using information from the extract: (i) the value in US$ of China’s contribution to global GDP growth in 2015 [2] (ii) the number of children born in Nauru in 2015. [2] (d) Analyse, using a production possibility curve diagram, how the discovery of new oil reserves would affect an economy. [5] (e) Discuss whether a firm would benefit from a fall in its country’s exchange rate. [5] (f) Explain, using information from the extract and Fig. 1, what might have happened to the market for steel in China in 2015. [4] (g) Discuss whether engaging in free trade increases living standards in a country. [6]

30 marks

Mark scheme: 1(a) Identify from the extract, two monetary policy measures. interest rates (1) exchange rates (1) 2 expansionary monetary policy 1(b) Explain two causes of a fall in the birth rate. 1 mark each for each of two causes identified: • rise in incomes / standard of living • Increase in education • more women working • improved family planning • women marrying later • improved social provision / more affordable healthcare • higher cost of raising children / cut in government child benefits • fall in infant mortality rates • government discourages births. 1 mark each for each of two explanations: • richer people tend to have fewer children – tend to spend more on their education, do not rely on children to support them • increased education raises people’s expectations of living standards for themselves and for their children • more educated women tend to marry later • more knowledge and availability of ways to limit families will reduce the number of unwanted births • more children surviving to adulthood so fewer births • working women tend to limit their families to avoid too many career breaks • provision of state pensions and healthcare reduces parents, need to have children to look after them • reduces incentives to have children. 4 Question Answer Marks Guidance 1(c)(i) Calculate, using information from the extract: the value in US$ of China’s contribution to global GDP growth in 2015 $546 billion (2) Correct method, i.e. 20% of US$2.730 billion or $546/546 billion (1) 2 1(c)(ii) Calculate, using information from the extract: the number of children born in Nauru in 2015. 250 (2) Correct method, i.e. 25 × 10 (1) 2500 (1) 2 1(d) Analyse, using a production possibility curve diagram, how the discovery of new oil reserves would affect an economy. Up to 4 marks for the diagram: • 1 mark for axes correctly labelled • 1 mark for original curve/straight downward sloping line drawn to the axes. • 1 mark for new production possibility curve • 1 mark for indicating curve will shift to the right – either by arrows or labels. Up to 1 mark for explanation: A discovery of new oil reserves will increase productive potential / capacity / be able to produce more / results in economic growth (1) 5 Accept any reasonable label of axis. If labelled with oil / petrol accept parallel PPCs. Do not reward output / production increases O e.g. capital goods e.g. consumer goods B B A A O other products oil / petrol B1 A B Question Answer Marks Guidance 1(e) Discuss whether a firm would benefit from a fall in its country’s exchange rate. Up to 3 marks for why it might: Lower prices of exports (1) increase demand for its products (1) raise sales / revenue (1) increase profits (1). Increase size of market (1) enabling it to take greater advantage of economies of scale (1) lower average costs of production (1). Domestic producers can produce goods cheaper than overseas goods (1) resulting in higher home sales (1). Up to 3 marks for why it might not: Increase price of imports (1) raise a firm’s costs of production (1) lower profits (1). If demand for exports is price-inelastic (1) a fall in price of exports will cause a fall in revenue (1). A fall in the exchange rate (1) may create uncertainty making it difficult for a firm to plan (1) Maybe recession in other countries (1) will not result in increased sales (1). Quality of goods may be poor compared with other competitors (1) sales do not rise (1). 5 To achieve full marks, benefits to a firm must be discussed. 1(f) Explain, using information from the extract and Fig. 1, what might have happened to the market for steel in China in 2015. The diagram shows: supply decreasing (1). price rising (1). demand contracting / less steel / fall in quantity (1). if the subsidy to steel industry was cut (1). demand and supply are inelastic (1). 4 Question Answer Marks Guidance 1(g) Discuss whether engaging in free trade increases living standards in a country. Up to 4 marks for why it might: Free trade may increase competition / removal of tariffs and quotas (1) encourages multinational corporations (MNCs) to set up in country (1) specialise (1) drives down prices (1) promotes efficiency (1) encourages innovation (1) increases quality (1) increase the range of products available (1) reduce unemployment (1) raise income/GDP (1). May increase the size of firms’ markets (1) allowing them to take advantage of economies of scale (1). Up to 4 marks for why it might not: Free trade may cause some industries to go out of business (1) increasing unemployment (1) reducing incomes / GDP falls (1) may cause higher pollution (1). Unsafe products/low quality products may be imported (1). Dumping may occur (1) driving out domestic producers (1) which can raise prices (1) lower quality in the long run (1). 6

This question in 0455/23 Oct/Nov 2017

4 In August 2015, China devalued its currency, the yuan. The Chinese Government was trying to increase output, including the output of food. It had experienced a slow-down in its economic growth. However, some other countries had actually experienced a decrease in output. One of the causes of the decline in economic growth in some countries was problems connected with their commercial banks. Some commercial banks were at risk of going out of business. (a) Define ‘devaluation’. [2] (b) Explain two disadvantages of a decrease in a country’s output. [4] (c) Analyse the effect on the market for food of an increase in population combined with a prolonged period of bad weather. [6] (d) Discuss whether a central bank should lend to commercial banks which get into financial difficulties. [8]

20 marks

Mark scheme: 4(a) Define ‘devaluation’. A fall in the value (1) of the currency (1) in the case of a fixed exchange rate/caused by government decision / against other currencies (1). 2 Question Answer Marks Guidance 4(b) Explain two disadvantages of a decrease in a country’s output. 1 mark each for each of two benefits identified: • rise in unemployment / recession / less exports • reduction in living standards • reduction in tax revenue. 1 mark each for each of two explanations given: • fewer workers will be needed if output falls/cyclical unemployment • negative impact on balance of payments • there will be fewer goods and services for people to consume • lower incomes and spending to tax • lower GDP. 4 4(c) Analyse the effect on the market for food of an increase in population combined with a prolonged period of bad weather. There will be more people to buy food (1) demand would increase – written or shown by a shift to the right of a demand curve (1). Bad weather will reduce crop yields (1) supply will decrease – written or shown by a shift to the left of the supply curve (1). Price will increase (1) but the effect on quantity is unclear (1) – can both be shown by change in equilibrium price and quantity on a diagram. 6 Question Answer Marks Guidance 4(d) Discuss whether a central bank should lend to commercial banks which get into financial difficulties. Up to 5 marks for why it should: A central bank is a lender of last resort (1) one of its functions is to lend to commercial banks when they cannot borrow elsewhere (1) example of another function (1). If a central bank does not lend, the commercial banks may collapse (1) holders of bank accounts will lose money (1) they may get into difficulties (1) there may be a ‘run’ on other banks (1) with people withdrawing their money (1) putting other banks at risk (1). Fewer banks would reduce the funds for firms to borrow (1) investment would be reduced (1) economic growth would decline (1) makes it more difficult for commercial banks to carry out their function (1) example of another function (1). Up to 5 marks for why it should not: May encourage banks to take risks (1) lend to creditworthy customers (1) they may think they are too big to fail (1). It would involve an opportunity cost (1) could use funds to lend to new, expanding banks (1). 8

This question in 0455/23 Oct/Nov 2017

6 More than 80% of Qatar’s population are immigrants. Net immigration has helped to meet the country’s demand for labour. As well as a shortage of workers, the country has a shortage of drinking water. The government has run public campaigns to stop people using their free supply of drinking water to fill their swimming pools and water their gardens. In 2016, the government increased its spending to increase the country’s economic growth rate. (a) Define net immigration. [2] (b) Explain how market forces would respond to a shortage of drinking water. [4] (c) Analyse what determines the demand for labour. [6] (d) Discuss whether or not increased government spending will increase economic growth. [8]

20 marks

Mark scheme: 6(a) Define net immigration. More people coming to live in the country than leaving the country to live elsewhere (2). The number of immigrants exceeding emigrants (2). The difference between immigration and emigration (1). People coming to live in the country (1). 2 6(b) Explain how market forces would respond to a shortage of drinking water. A shortage means demand exceeds supply (1) price would rise (1) more would be supplied (1) due to the profit motive (1) price signal sent to producers (1) demand would also contract (1). Demand likely to be price inelastic (1) leading to large rise in price (1). 4 Up to 2 marks for a relevant diagram, showing demand being greater than supply (1) and price below equilibrium (1). 6(c) Analyse what determines the demand for labour. Demand for goods and services (1) demand for labour is a derived demand (1). Productivity/skills (1) higher productivity will increase demand for labour (1). Wage rates (1) higher wage rates will reduce demand for labour (1). Price of capital (1) higher price may increase demand for labour if they are substitutes (1) higher price will reduce demand for labour if they are complements (1). Non-wage costs e.g. employer’s contribution to pension scheme (1) higher costs reduce demand for labour (1). Taxes on employment of labour (1) higher taxes reduce demand for labour (1). Government employment subsidies (1) higher subsidies will increase demand for labour (1). 6 Question Answer Marks Guidance 6(d) Discuss whether or not increased government spending will increase economic growth. Up to 5 marks for why it might: Higher government spending will increase total (aggregate) demand (1) higher total demand may encourage firms to increase output (1). Higher government spending on education/training (1) health (1) may raise labour productivity (1) increase productive potential/long run economic growth (1). Higher government spending on infrastructure (1) will reduce costs of production (1) encouraging firms to expand (1). Higher government spending on R & D (1) would lower costs/raise productive potential (1). Up to 5 marks for why it might not: Higher government spending may increase inflation (1) this may make products less internationally competitive (1) reducing net exports (1) reducing output (1). Higher government spending may not increase total demand if offset by e.g. lower consumer expenditure (1). Higher government spending may not increase total demand if it is accompanied by higher taxation (1). Higher government spending on education/training may not increase labour productivity if it does not raise the quality of education/training (1). Higher benefits (1) may reduce incentives to work (1). Government spending may be spent wastefully/inefficiently (1). 8

This question in 0455/21 May/June 2018

7 World output has grown in recent years, but a number of countries have experienced a recession. The removal of trade restrictions such as import tariffs has slowed down, reducing the growth of world trade. (a) Define import tariff. [2] (b) Explain two benefits of an increase in world output. [4] (c) Analyse how a recession may reduce a country’s imports. [6] (d) Discuss whether or not a developing country will benefit from the removal of trade restrictions. [8]

20 marks

Mark scheme: 7(a) Define import tariff. A tax (1) imposed on products purchased from other countries / imports (1). 2 7(b) Explain two benefits of an increase in world output. Higher output may increase employment (1) better use of resources (1). Higher output may increase incomes (1) reduce poverty / raise living standards (1) increase choice (1). Higher output may increase government tax revenue (1) to increase education/healthcare (1). Higher output may include higher agricultural output (1) reduce risk of malnutrition (1). 4 7(c) Analyse how a recession may reduce a country’s imports. A recession is a decrease in GDP (1) over 6 months or more / two consecutive quarters (1). A recession is likely to reduce incomes (1) increase unemployment (1) reduce confidence levels (1) consumer spending is likely to fall (1). As output is falling (1) firms are likely to buy less raw materials from abroad (1) buy fewer capital goods from abroad (1). During recessions governments may impose trade restrictions which will reduce imports (1). A recession may cause a depreciation of the currency (1) making imports more expensive (1). 6 7(d) Discuss whether or not a developing country will benefit from the removal of trade restrictions. Up to 5 marks for why it might: Developing countries tend to have more trade restrictions on their products (1). The removal of trade restrictions on the country’s products can enable a country to specialise in the products it is best at producing (1) they can be sold at a lower price which may increase demand in foreign markets (1). The removal of trade restrictions that the country imposes may mean it can purchase raw materials (1) and capital equipment (1) at a lower price (1) reducing costs of production (1). Consumers may enjoy a greater variety of products (1) greater availability of products (1) lower prices (1) higher quality (1). Domestic firms may respond to greater competition by becoming more efficient (1). The removal of trade restrictions may increase inward investment / attract MNCs (1). Up to 5 marks for why it might not: Infant industries (1) may not be able to survive without protection (1) because they cannot take advantage of economies of scale (1). Declining industries (1) may go out of business more quickly (1) causing unemployment (1). Strategic industries (1) may go out of business disrupting the rest of the economy (1). There may be dumping (1) with foreign firms selling products at below cost price (1) to drive domestic firms out of business (1) and then raising price (1). Demerit goods may be imported (1). May result in imports exceeding exports, (1) causing a current account deficit (1). Tax revenue may fall (1) revenue from tariffs may account for a relatively high proportion of a developing country’s tax revenue (1). 8

This question in 0455/22 May/June 2018

7 In 2016, there were fears that the Singaporean economy could enter a recession because of falling demand from China, its biggest export market. One of the results of a recession is likely to be a fall in consumer spending. A previous recession in 2008 had led to unemployment increasing from 1.6% to 3.4%. Singapore’s central bank therefore decided to intervene in the foreign exchange market to influence the value of the currency. (a) Define recession. [2] (b) Explain why a recession is likely to reduce consumer spending. [4] (c) Analyse the consequences of rising unemployment on a government’s spending and tax revenue. [6] (d) Discuss whether or not an exchange rate depreciation will prevent an economy from experiencing a recession. [8]

20 marks

Mark scheme: 7(a) Define recession. A fall in GDP / negative economic growth (1) for two successive quarters / 6 months or more (1) 2 7(b) Explain why a recession is likely to reduce consumer spending. Rise in unemployment (1) reduced income (1) reduced ability to spend (1). Consumers save more (1) for fear of future / increased pessimism (1). Likely to be associated with lower prices (1) consumers delay purchases (1). 4 7(c) Analyse the consequences of rising unemployment on a government’s spending and tax revenue. Pressure on the government budget will increase (1) as tax revenue will fall (1) from both direct (income) taxes (1) and indirect (spending) taxes (1). Expenditure on unemployment benefits will increase (1) spending in other areas will increase (1) e.g. healthcare (1) higher spending on benefits involves an opportunity cost (1) e.g. education (1). A government may increase spending and reduce taxes to increase total demand (1) to reduce cyclical unemployment (1). Taxes may have to rise (1) creating a disincentive to work and enterprise (1). 6 Question Answer Mark Guidance 7(d) Discuss whether or not an exchange rate depreciation will prevent an economy from experiencing a recession. Up to 5 marks for why it might: Depreciation means foreign consumers have to exchange less units of their currency for one unit of domestic currency (1), making exports cheaper (1) raising export demand (1) and imports more expensive (1) reducing demand for imports (1) as domestic consumers will find domestic goods and services relatively cheaper (1). Firms have more domestic and foreign demand (1) and will increase output to meet this demand (1) preventing a recession (1). Net exports will increase (1) increasing aggregate demand (1). Up to 5 marks for why it might not: Demand for imports may be inelastic (1) and a depreciation will not have a great effect (1). Demand for exports may be inelastic (1) so export demand will not boost output (1). If there is a recession in main export markets then demand for exports may still fall (1) even if they are now relatively cheaper (1). It may cause cost-push inflation (1) as domestic firms have to pay more for imported inputs (1). Depreciation may worsen investor confidence (1) reducing investment and causing a recession (1). 8

This question in 0455/23 May/June 2018

6 Teachers in many countries oppose their governments’ cuts in spending on education. They worry that this could reduce the standard of education and also the welfare of teachers employed in the state sector. Some teachers specialise in teaching one subject while others teach a number of subjects. (a) Identify two reasons why a person may want to work in the state sector. [2] (b) Explain two reasons why a government may want to cut spending on education. [4] (c) Analyse the contribution that education can make in an economy. [6] (d) Discuss whether or not a worker would benefit by specialising. [8]

20 marks

Mark scheme: 6(a) Identify two reasons why a person may want to work in the state sector. Higher wages (1) job security (1) better pension (1) good working conditions (1) status of public sector worker (1) job satisfaction e.g. teacher (1) patriotism / to perform a public service (1) state sector jobs may be more widely available (1). 2 6(b) Explain two reasons why a government may want to cut spending on education. Government would like to reduce its total spending (1) to reduce government borrowing (1) cut the national debt (1) avoid having to raise taxes (1) to reduce total demand (1) reducing inflation (1) Spending on education incurs an opportunity cost (1) government would prefer to spend on other areas e.g. defence, healthcare (1). Education is less valued by the public (1) than other services e.g. health, defence (1). Government would like to reduce wasteful expenditure (1) to increase the efficiency of the public sector (1). A drop in the number of students in education (1) less spending needed (1). Government wants students to bear a greater proportion of costs (1) since students ultimately benefit from better paid jobs (1). 4 Question Answer Marks Guidance 6(c) Analyse the contribution that education can make in an economy. Education enables the population to develop the knowledge (1) skills (1) for future development (1) better skills may improve productivity (1) increased output / economic growth (1) improved quality of output (1) better skills may attract foreign investors / MNCs to the country (1). Educated people have better job opportunities (1) potentially enabling them to earn higher incomes (1) leading to increased consumption (1) which reduces poverty / improves living standards (1). Increased consumption could lead to higher demand in the economy (1) increasing output (1). Education enables the economy to move to a tertiary based economy (1) tertiary based economy relies heavily upon a well-educated population (1). Education enables women to play a more active role in the economy (1) enabling them to find jobs (1) and earn a living independently (1). Education enables people to start their own business (1) increasing output (1). Education provides employment e.g. teachers, janitors (1) More highly educated people may be more concerned about the environment (1) may reduce external costs (1). More highly educated people may be healthier (1) reducing costs of healthcare / raising productivity (1). 6 Question Answer Marks Guidance 6(d) Discuss whether or not a worker would always benefit by specialising. Up to 5 marks for why they would benefit: By specialising workers focus on what they are best at (1) acquiring better skills (1) quality of goods increase (1) output/productivity increases (1) worker earns a higher income (1) easier to find job in the same sector (1) more likely to achieve promotion (1) Saves time (1) workers don’t need to think of next process / move from place to place (1). Specialised workers are limited in supply (1) causing their wage to be higher (1). Invention of new technology (1) makes the job easier (1). Up to 5 marks for why they would not benefit: Workers may experience boredom (1) if the work is repetitive (1) reducing productivity/efficiency/motivation (1) Those with a limited amount of skills (1) may find it difficult to obtain alternative jobs (1) may be replaced by machinery more easily (1) risk of unemployment (1). Workers may be over-dependent / too reliant on one skill / risk over- specialisation (1) unable to complete the task without the help of others (1) especially when production is disrupted (1). Training to specialise has an opportunity cost (1) lost income / later starting date (1) 8 Each point may be credited only once, on either side of an argument, but separate development as to how/why the outcome may differ is to be rewarded.

This question in 0455/21 Oct/Nov 2018

6 A relatively high proportion of people from the Philippines either work in call centres or abroad. Call centres employ 1.2 million people in the Philippines and account for 8% of the country’s Gross Domestic Product. Due to the time difference with the US, the main market for call centre services, many Filipinos have to work at night. The call centres are introducing new technology including robots. (a) Define Gross Domestic Product (GDP). [2] (b) Explain two reasons why a person may be willing to work at night. [4] (c) Analyse how having some of its population working abroad may benefit an economy. [6] (d) Discuss whether or not advances in technology benefit an economy. [8]

20 marks

Mark scheme: 6(a) Define Gross Domestic Product. The (total) output/income/expenditure (1) of a country/economy (1). 2 6(b) Explain two reasons why a person may be willing to work at night. A person may lack the skills to gain another job (1) have no choice (1). There may be a high unemployment rate (1) a person will be grateful for any job (1). Night work may fit in with family circumstances (1) a person may have to look after children / older relatives during the day (1) The job may be well paid (1) compensating for the inconvenience (1). The job may offer fringe benefits (1) example e.g. longer holidays (1). A person may enjoy their job (1) example (1). A person may need to earn additional income (1) to supplement income from day job / to support their family (1). 4 6(c) Analyse how having some of its population working abroad may benefit an economy. The workers may send income home (1) helping to support dependents / raise living standards of dependents (1) saving on some government benefits having to be paid (1). They may gain skills abroad (1) if they return they will increase the productivity of the labour force (1) may raise output / cause economic growth (1) reduce firms costs of production (1). The money they sent back will be an inflow of foreign currency / remittance / primary income (1) improving the current account position on the balance of payments (1). May reduce unemployment (1) if the workers’ skills are not in demand at home (1). 6 Question Answer Marks Guidance 6(d) Discuss whether or not advances in technology benefit an economy. Up to 5 marks for why they might: Advances in technology will raise the quality / productivity of capital / labour (1) it will increase the output that can be made / cause economic growth / increase GDP (1) may raise income (1) Advances in technology can lower costs of production (1) reduce cost-push inflation (1) make domestic products more internationally competitive (1) improve the current account position of the balance of payments (1). May raise the quality of products produced (1) raise living standards (1) make domestic products more quality competitive (1) improve the position of the current account of the balance of payments (1). May attract MNCs (1). Provide employment for certain classes of worker (1) e.g. skilled (1). Up to 5 marks for why they might not: Advances in technology may result in capital equipment that can replace labour (1) result in unemployment (1). If workers do not have sufficient skills (1) they may not be able to get the most out of more advanced equipment (1). New capital equipment may worsen working conditions (1) e.g. workers may get eye strain by looking at a screen for long periods of time (1). May be an opportunity cost (in the short run) (1) as more resources may have to be devoted to capital goods / R&D (1). New capital equipment may be expensive (1) increase firm’ costs (1) may be an opportunity cost if provided by the government (1). 8 Each point may be credited only once, on either side of an argument, but separate development as to how/why the outcome may differ is expected.

This question in 0455/22 Oct/Nov 2018

1 India: a growing success In 2016, the Indian economy grew by 7.5%. This made it the world’s fastest growing large economy. In contrast, the Chinese economy grew by 6.8%. India had some other macroeconomic successes. Its price level rose by less in 2016 than it had in any year since 2004. The price of oil fell in 2016 and India is a large importer of oil. The government’s use of monetary policy helped to keep down rises in the general price level. India’s manufacturing sector grew rapidly in 2016. One industry that performed particularly well was the vehicle industry. India was the world’s sixth largest producer of vehicles, employing 26 million workers. India was the world’s largest producer of tractors. In 2015, the price of tractors was increased. This led to a short-term fall in demand but a rise in revenue. The growth of the vehicle industry has enabled firms in the industry to employ more specialised workers and made it easier for these larger firms to borrow from banks. It is expected that the industry will be able to recruit extra workers in the future because India’s labour force is growing. In 2014, India’s labour force was 500m and this grew by 4% between 2014 and 2016. The economic growth rate and the population growth rate in recent years are shown in Fig. 1.1. The rate of economic growth and its stability affect households’ decisions on how much they spend and save. 12 10 8 6 4 2 0 2010 2011 2012 2013 2014 2015 2016 Economic growth rate (%) Population growth rate (%) Fig. 1.1 India’s economic growth rate and population growth rate 2010–2016 The rising optimism about the performance of India’s economy has increased total demand in the economy. However, the Reserve Bank of India, the country’s central bank, has been relatively successful at keeping the inflation rate close to the government’s target which in 2016 was 4%. One influence on the country’s future macroeconomic performance will be changes in its population. India is set to have one of the world’s youngest populations by 2020, with an average age of only 29. (a) Identify, using information from the extract, two reasons why India’s inflation rate fell in 2016. [2] (b) Explain, using information from the extract, whether demand for Indian tractors was price-elastic or price-inelastic in 2015. [2] (c) Explain two internal economies of scale referred to in the extract. [4] (d) Calculate, using information from the extract, the percentage of India’s labour force that was employed in the vehicle industry in 2016. [2] (e) Analyse, using Fig. 1.1, what happened to India’s output and population over the period shown. [5] (f) Discuss whether or not a government should aim for a low rate of inflation. [5] (g) Explain, using information from the extract, two reasons why consumer expenditure may increase in India in the future. [4] (h) Discuss whether or not having a young population is a benefit to an economy. [6]

30 marks

Mark scheme: Question Answer Marks 1(a) Identify, using information from the extract, two reasons why India’s 2 inflation rate fell in 2016. Fall in oil prices (1). Monetary policy (1). 1(b) Explain, using information from the extract, whether demand for Indian 2 tractors was price-elastic or price-inelastic in 2015. Inelastic (1) price and revenue moved in the same direction (1). 1(c) Explain two internal economies of scale referred to in the extract. 4 • managerial/labour economies (1) employing specialised workers (1) • financial economies (1) easier to borrow from banks / lower borrowing costs (1). 1(d) Calculate, using information from the extract, the percentage of India’s 2 labour force that was employed in the vehicle industry in 2016. 5% (2). Correct working: (26m / 500m + 20m) × 100 / 520m (size of labour force) / 5.2% (percentage in 2014) (1). 1(e) Analyse, using Fig.1, the relationship between India’s economic 5 growth rate and population growth rate over the period shown. Output rose over the period / economic growth rate was positive over the period (1). Economic growth rate fell over the whole period (1). Economic growth rate fell from 2010 to 2012 (1). Economic growth rate rose from 2012 to 2016 (1). Economic growth rate is highest in 2010 (1). Population rose over the period (1). Population growth rate fell over the period / was on a downward trend (1). Population growth rate was relatively stable (1). Population growth rate is highest in 2010 (1). Economic growth rate was higher than population growth rate (1) every year (1). Economic growth fluctuated more than population growth rate (1). The data suggests that GDP per head / living standards would have risen over the period (1). 1(f) Discuss whether or not a government should aim for a low rate of 5 inflation. Up to 3 marks for why it should: A low rate of inflation may result in increased international competitiveness (1) improving the current account position (1). It may create certainty/stability (1) encouraging firms to invest (1) increasing output (1) increasing employment / lowering unemployment (1). It will not cause a random redistribution of income (1) protecting savers (1). It may raise profit (1) if demand-pull (1) encourage firms to expand (1) increasing employment (1). It stops purchasing power being eroded by too much (1). Up to 3 marks for why it should not: It may involve policy measures such as e.g. higher income tax (1) which reduce total (aggregate) demand (1) and so cause unemployment (1). Inflation can reduce debts (1) keeping firms in business (1) stopping households getting into difficulty (1). Employment may be protected (1) wages can be raised by less than inflation (1) enabling firms in difficulty to continue in production (1). A government may have other policy objectives (1). There is a risk that this could lead to deflation (1) have adverse macroeconomic effects / lose benefits of low rate of demand-pull inflation (1). 1(g) Explain, using information from the extract, two reasons why 4 consumer expenditure may increase in India in the future. The economy is growing / there is a rise in GDP per head (1) more income increases people’s ability to spend (1). There is growing optimism (1) which is likely to increase people’s willingness to spend as they may expect incomes/employment to be high in the future (1). The population is increasing (1) more people to buy goods and services (1). The labour force is increasing (1) more people with incomes to spend (1). The population is due to be relatively young (1) the young may spend a relatively high proportion of their income (1). Low/stable inflation (1) may enable interest rates to be low (1). 1(h) Discuss whether or not having a young population is a benefit to an 6 economy. Up to 4 marks for why it might: They may increase the size of the labour force (1) increase productive capacity / potential output (1). They may be more geographically mobile (1) allowing firms to fill vacancies (1). They may have up to date skills (1) may be fitter / physically stronger (1) raise productivity (1). A ready supply of young workers may attract MNCs (1) increase output (1). Up to 4 marks for why it might not: If a high proportion are aged below school leaving age (1) there will be a high dependency ratio (1) placing a burden on workers (1). There may be a need for more schools (1) resources could have been used for other purposes (1) opportunity cost (1). Young workers may be less experienced (1) less productive/skilled (1) may need more training (1) may emigrate (1). There may be a fall in parents working for a while (1) reduce output (1).

This question in 0455/22 Feb/March 2019

2 Ireland has attracted a significant number of foreign multinational companies (MNCs) to set up production in the country. These firms employ approximately 10% of the country’s labour force and make a high proportion of Ireland’s exports. The surplus on the current account of Ireland’s balance of payments fell in 2016 while government spending rose. (a) Identify two reasons why an MNC may decide to start producing in a foreign country. [2] (b) Explain two reasons why someone may want to work for an MNC. [4] (c) Analyse how an increase in exports could improve a country’s economic performance. [6] (d) Discuss whether or not an increase in government spending will reduce a surplus on the current account of that country’s balance of payments. [8]

20 marks

Mark scheme: 2(a) Identify two reasons why an MNC may decide to start producing in a 2 foreign country. • access to raw materials • cheap labour • skilled labour • large market • government support • low taxes • avoid trade restrictions 2(b) Explain two reasons why someone may want to work for an MNC. 4 • wages may be high (1) giving high living standards (1) • working conditions may be good (1) e.g. short working hours, good health and safety standards (1) • training may be good (1) raising worker’s future job prospects (1) • fringe benefits may be good (1) e.g. free accommodation (1) • more chance of promotion (1) higher earnings in the long run (1) • Good reputation (1) prestige working for the firm / increased future employment opportunities (1). 2(c) Analyse how an increase in exports could improve a country’s 6 macroeconomic performance. An increase in exports can increase export revenue (1) this may reduce a current account deficit (1). An increase in exports will increase total (aggregate) demand (1) firms will produce more products / higher output (1) more workers will be employed (1) unemployment will fall (1) economic growth will increase / incomes will rise / higher living standards (1). 2(d) Discuss whether or not an increase in government spending will 8 reduce a surplus on the current account of the country’s balance of payments. Up to 5 marks for why it might: Higher government spending may go on imports (1) e.g. imported computers for government offices (1). Higher government spending on e.g. state benefits (1) will increase disposable income (1) some of this might be spent on imports (1). Higher government spending will increase total (aggregate) demand (1) this may cause inflation (1) reduce international competitiveness (1) reduce exports (1) increase imports (1). Up to 5 marks for why it might not: Government spending on education and training / healthcare (1) may raise labour productivity (1) reduce costs of production (1) improve quality (1) increased demand for domestically produced products (1) increase exports (1) reduce imports (1). Government spending on infrastructure (1) may reduce transport costs (1) increasing price competitiveness (1) increasing exports (1) reducing imports (1). The government may subsidise domestic products (1) lowering the price of domestic products (1) increasing exports (1) reducing imports (1).

This question in 0455/22 Feb/March 2019

3 The economic problem results in people having to make choices. In Bulgaria, in recent years, people have changed how much they spend. The Bulgarian government is encouraging people to spend more. It is trying to ensure that deflation does not return and that the country will continue to experience an increase in output. (a) Identify two ways a government could encourage people to spend more. [2] (b) Explain how the economic problem results in people having to make choices. [4] (c) Analyse why deflation may cause a fall in output. [6] (d) Discuss whether or not a country will suffer if its output falls. [8]

20 marks

Mark scheme: 3(a) Identify two ways a government could encourage people to spend 2 more. • lower taxes • increase government spending / expansionary fiscal policy • increase money supply • reduce interest rates / expansionary monetary policy • raise subsidies 3(b) Explain how the economic problem results in people having to make 4 choices. The economic problem is unlimited wants (1) but limited resources (1). As resources are limited, people cannot have everything they want / not everything can be produced / there is scarcity (1) there is an opportunity cost (1). 3(c) Analyse why deflation may cause a fall in output. 6 A fall in the price level (1) may discourage spending / reduce total (aggregate) demand (1) households waiting for prices to fall further (1) the fall in demand may reduce firms’ output (1). Deflation may reduce firms’ profits (1) this may discourage investment (1) reduce demand for capital goods (1) lower the output of capital goods (1). 3(d) Discuss whether or not a country will suffer if its output falls. 8 Up to 5 marks for why it might: Lower output may mean that people will have fewer goods and services (1) this could reduce living standards / reduce incomes (1). Lower output may mean fewer workers are needed (1) unemployment may rise (1). If consumers cannot buy domestically produced products (1) they may buy imports (1) exports may fall (1) resulting in a current account deficit (1). MNCs may leave the country (1) reducing employment (1). Tax revenue may fall (1) reducing government’s ability to spend on e.g. education (1). Up to 5 marks for why it might not: Living standards may rise (1) if output falls by less than population (1). A lower output may reduce external costs (1) e.g. pollution (1) destruction of sights of natural beauty (1). Lower output may reduce demand for imports (1) improve the current account position (1).

This question in 0455/22 Feb/March 2019

4 In March 2017, Peru was hit by floods and the strongest winds in decades. Roads, bridges, houses and capital goods were destroyed. It is expected that the damage caused will affect Peru’s Human Development Index (HDI) and economic growth rate. In 2016, Peru experienced a 4% economic growth rate which was higher than the growth rate of the USA. (a) Define a capital good. [2] (b) Explain two causes of an increase in a country’s HDI. [4] (c) Analyse, using a production possibility curve (PPC) diagram, the effect of damaging weather on an economy. [6] (d) Discuss whether countries with a high Gross Domestic Product (GDP) per head will have a faster rate of economic growth than countries with a low GDP per head. [8]

20 marks

Mark scheme: 4(a) Define a capital good. A human-made good (1) used to produce other goods and services (1). 2 4(b) Explain two causes of an increase in a country’s HDI. • an increase in GDP / GNI / income per head (1) raises the goods and services people can consume / due to e.g. higher employment (1) • an increase in life expectancy (1) indicates better healthcare / due to better healthcare / more investment in healthcare (1) • an increase in education / mean and expected years of schooling (1) increases job opportunities / quality of life / due to government investing more in education (1) 4 4(c) Analyse, using a production possibility curve (PPC) diagram, the effect of damaging weather on an economy. Up to 4 marks for the diagram: • axes correctly labelled in terms of two different products or types of products (1) • initial curve or downward sloping line is drawn to the axes (1) • second curve or downward sloping line is drawn to the axes (1) • An indication either by labelling or an arrow that the curve has shifted inwards / left (1) Up to 2 marks for written analysis: Bad weather will reduce the quantity of resources (1). The amount that can be produced with fewer resources will fall (1). 6 O capital goods consumer goods Question Answer Marks Guidance 4(d) Discuss whether countries with a high Gross Domestic Product (GDP) per head will have a faster rate of economic growth than countries with a low GDP per head. Up to 5 marks for why they might: They are likely to have good education (1) good healthcare (1) this will mean skills will be high (1) productivity will be high (1) there may be advances in technology (1) reducing costs of production (1) exports may increase (1). Unemployment may be low (1) with most resources being used (1). MNCs may be attracted to set up in the country (1) contributing to the country’s output (1). Foreign banks may be more willing to lend to the countries’ firms (1) allowing them to expand (1). High incomes are likely to mean high demand / high consumer spending (1) encouraging firms to produce more (1). Up to 5 marks for why they might not: Countries with a low GDP per head may discover raw materials (1) which may be in high world demand (1). People in poorer countries may have more drive to improve their living standards (1) they may work harder (1). Richer countries may have a lower rate of population growth or declining populations (1) this may mean their labour forces are growing more slowly (1) restricting their ability to produce more goods and services (1). Other factors may influence economic growth (1) e.g. type of government policies pursued / deficit on the current account of the balance of payments (1). 8

This question in 0455/22 May/June 2019

1 Iceland’s Economic Structure The people of Iceland once depended on farming and fishing as their main source of income. By 2008, the Icelandic economy was also very heavily dependent on its financial sector. However, the country is now well-known internationally for tourism. Even though the primary sector now only employs a small proportion of the country’s labour force, the influence of this sector in policy-making is very strong. For example, in the fishing industry, there are many government regulations. Regulations that restrict foreign investment in the fishing industry both protect domestic fisherman and the stock of fish in Icelandic waters. Regulation also affects the price elasticity of supply (PES) of fish. The quantity of fish supplied tends to change by a smaller percentage than the change in its price. From 2002 to 2007, Iceland’s annual economic growth rate averaged 5%. In 2006, Iceland’s Gross Domestic Product (GDP) was US$17 billion and in 2007 it grew by 9%. This high growth rate was due to the increased availability of bank loans and also the increasing income of its major trading partners, including the European Union (EU) and Norway. It was during this period of rapid economic growth that the financial sector became an important part of the Icelandic economy. The major commercial banks supported increased consumer spending and major construction projects which improved the standard of living of Icelanders. In addition, commercial banks also expanded into international markets. The international markets were growing rapidly between 2002 and 2007 which brought more money back into the Icelandic financial sector. However, Iceland faced a major financial crisis in 2008 where all three of its major privately-owned commercial banks failed. This led to falling overall levels of output and increased unemployment. Fig. 1.1 shows the economic growth rate and unemployment rate in Iceland from 2002 to 2014. 12 10 8 6 4 2 0 2002 2003 2004 2005 2006 2007 20082008 2009 20102010 2011 2012 2013 2014 –2 –4 –6 Unemployment rate (% of total labour force) Economic growth rate (% change in GDP) Fig. 1.1 Economic growth rate and unemployment rate in Iceland from 2002 to 2014 The recovery from 2010 to 2017 was initially possible due to loans obtained from international organisations. More recently, it was also due to successful tourism campaigns that have made Iceland a ‘must-see’ destination for tourists. (a) Identify, using information from the extract, two industries that are in the primary sector of the Icelandic economy. [2] (b) Explain, using information from the extract, two reasons for government regulation of the fishing industry in Iceland. [4] (c) Explain, using information from the extract, two reasons, apart from changes in employment, for Iceland’s high economic growth rate from 2002 to 2007. [4] (d) Calculate, using information from the extract, Iceland’s GDP in 2007. [2] (e) Analyse, using Fig. 1.1, the relationship between changes in the economic growth rate and the unemployment rate over the period shown. [5] (f) Explain, using information from the extract, whether the supply of Iceland’s fish is price-elastic or price-inelastic. [2] (g) Discuss the advantages and disadvantages of the activities of commercial banks to an economy. [5] (h) Discuss whether or not a growth in tourism is an advantage to a country such as Iceland. [6]

30 marks

Mark scheme: 1(a) Identify, using information from the extract, two industries that are in the primary sector of the Icelandic economy. • farming • fishing 2 1(b) Explain, using information from the extract, two reasons for government regulation of the fishing industry in Iceland. Protect domestic fishermen (1) to ensure they have a stable income (1) to ensure that jobs are preserved (1) can compete with foreign fishermen (1). Protect the stock of fish (1) to ensure sustainability of fish stocks (1) for future generations (1). 4 1(c) Explain, using information from the extract, two reasons, apart from changes in employment, for Iceland’s high growth rate from 2002–2007. • increased availability of bank loans (1) more borrowing (1) to fund consumption (1) and to fund investments (1). • increasing income of its major trading partners, including the European Union and Norway (1) Iceland can now export more to their trading partners (1) increase net exports / external demand / aggregate demand (1) 4 1(d) Calculate, using information from the extract, Iceland’s GDP in 2007. $18.53 billion (2) 18.53 or working e.g. $17bn × 0.09 = $1.53bn (1) 2 Question Answer Marks Guidance 1(e) Analyse, using Fig 1.1, the relationship between changes in the economic growth rate and the unemployment rate over the period shown. They both rose over the period (1) showing a positive relationship (1) unexpected (1) evidence from the data e.g. the unemployment rose from approx. 3.4 to 5% (1) the economic growth rate rose from 0.5 to 1.8% (1) Unemployment rate was relatively constant from 2002 to 2008 (1) while economic growth fluctuated (1). Unemployment was relatively stable from 2009 to 2014 (1). Between 2007 and 2009 the fall in the economic growth rate (1) to a negative value / recession (1) while there was a rise in the rate of unemployment (1). From 2009 to 2014 economic growth increased (1) and unemployment fell (1) the trends are moving in opposite directions (1) as would be expected (1) high economic growth rate should create more jobs (1). Between 2002 and 2004 there’s a significant increase in the economic growth rate (1) while there was only a slight fall in the unemployment rate (1). 5 No marks for a descriptive approach e.g. identifying the growth rate or the unemployment rate for specific years. 1(f) Explain, using information from the extract, whether the supply of Iceland’s fish is price-elastic or price-inelastic. It is price-inelastic (1) because the quantity of fish supplied tends to change by a smaller percentage than the change in its price (1). 2 Question Answer Marks Guidance 1(g) Discuss the advantages and disadvantages of the activities of commercial banks to an economy. Up to 3 marks for advantages to an economy: Lending (1) to consumers (1) enabling them to increase consumption (1) raising their living standards (1) and to firms (1) allowing them to invest (1) increase employment (1) increase output (1) expand into international markets (1) improve the current account of the balance of payments (1). Attract MNCs (1) by providing a range of services to these companies (1). Banks employ many people (1) keeping unemployment low (1) Up to 3 marks for disadvantages to an economy: May encourage saving (1) decreasing consumption/total demand (1) Banks may fail (1) losing customers’ money (1) risking damage to the economy / recession (1). May lend to risky businesses (1) which may cause fluctuations in output (1). May lend to individuals who cannot repay (1) pushing them into debt (1). May charge high interest rates (1) to gain high profits (1) which will increase firms’ costs of production (1) and make it difficult for individuals to repay (1). May lend for purchase of imports (1) worsening the current account (1) Risk of inflation (1) if banks lend too much (1). 5 Question Answer Marks Guidance 1(h) Discuss whether or not a growth in tourism is an advantage to a country such as Iceland. Up to 4 marks for why it might be: Tourism is an export of services (1) bringing in foreign currency (1) improving the current account balance (1). Tourism may increase government tax revenue (1) this could be spent on e.g. education (1). Tourism increases the demand for goods and services (1) creating employment/reducing unemployment (1) e.g. in hotels/restaurants/shops (1) increases output / contributes to economic growth (1). Tourism may attract MNCs/foreign investment (1) e.g. foreign hotel chains may set up in the country (1). More revenue from tourism may result in a rise in the exchange rate (1) this may reduce the price of imports (1) Less reliance on primary / secondary sector (1) benefits of diversification (1). Up to 4 marks for why it might not be: Tourism may create external costs (1) example e.g. pollution (1). Tourism may deplete resources (1) e.g. water (1). Tourism may place a strain on infrastructure, e.g. transport systems (1) Tourism jobs may be low-paid (1) low skilled (1) seasonal (1). Foreign firms may send profits home (1) foreign hotels may bring own employees (1). A high exchange rate may reduce exports / international competitiveness (1). Tourism may increase demand in the economy (1) pushing up the prices the local population have to pay / creating inflation (1). 6

This question in 0455/23 May/June 2019

1 New York: A Global Financial Centre New York is the best city in the world in terms of human capital according to the Global Financial Centres Index. This, along with economic freedom that encourages new business start ups, has contributed to high economic growth rates. In fact, the city’s economic growth rate is higher than the GDP growth rate for the entire USA. Overall, New York’s economy grew 3.4% in 2015, faster than the 2.4% recorded nationally. However, land area is scarce, especially in the Manhattan district of New York, where most economic activity is concentrated. The financial sector is the most important sector in the city’s economy – New York is home to the first and second largest stock exchanges in the world and 3 of the top 10 largest banks in the USA have their headquarters in New York. Improvements in education also contribute to New York’s fast economic growth rate as New York continues to attract students from all over the world and from various areas of study. Unemployment rates in the city continue to fall. In addition, average weekly wages in New York are consistently higher than the rest of the USA. Table 1.1 shows the average weekly hours worked and average weekly wages in New York between 2011 and 2017. Table 1.1 Average weekly hours worked and average weekly wages in New York, 2011–17 Average weekly hours worked Average weekly wages (US$) 2011 33.9 906.83 2012 34.1 933.66 2013 33.5 932.31 2014 33.4 935.87 2015 33.5 961.45 2016 33.4 976.95 2017 33.5 1011.03 New jobs that are created today are in middle and low-paying jobs, not in high-paying jobs. Finance industry workers are 20% of the workers in the city, but they earn more than half of all the wages paid in New York. The pay gap between workers in the finance industry and the 1.6 million other workers in the city continues to widen. This is often due to the lack of skills of the lower paid workers and also the male-dominance in the finance industry. In addition to the income inequality, continuous economic development in the city has affected the environment. The ever-expanding finance industry is also creating the risk of a repetition of the 2007–08 Global Recession with the possibility of bank failures. Rising trade protection by the US government may negatively affect American cities such as New York, especially while Asian cities such as Singapore, Hong Kong, and Shanghai continue to open up to free trade. (a) State a factor of production and identify an example of it from the extract. [2] (b) Explain, using information from the extract, two causes of economic growth in New York. [4] (c) Calculate, using information from the extract, the total number of workers in New York. [2] (d) Analyse, using Table 1.1, the relationship between average weekly hours worked and average weekly wages. [5] (e) Explain, using information from the extract, one reason for differences in earnings between different jobs in New York. [2] (f) Explain, using information from the extract, the possible negative effects of economic growth in New York. [4] (g) Discuss the advantages and disadvantages of a city having a large tertiary sector. [5] (h) Discuss whether or not opening up to free trade benefits an economy. [6]

30 marks

Mark scheme: 1(a) State a factor of production and identify an example of it from the extract. land (1) scarce land in Manhattan / New York (1). labour (1) finance industry workers / wages (1). capital (1) stock exchange (1). enterprise (1) new business start ups (1) 2 1(b) Explain, using information from the extract, two causes of economic growth in New York. • good human capital (1) high skills / labour productivity (1) • economic freedom encouraging business start-ups (1) increased investment / innovation (1) • strong finance/manufacturing growth (1) increased investment/consumption/exports (1) • education (1) improved skills (1) increased productivity/growth of tertiary sector/greater GDP per capita (1) attracts students who spend on local goods and services (1) • falling unemployment (1) greater use of resources (1) 4 Two causes must be explained for maximum marks. 1(c) Calculate, using information from the extract, the total number of workers in New York city. 2m (2). Correct working 1.6m × 100/80, or 80% = 1.6m, or 20% = 0.4m (1). 2 . Question Answer Marks Guidance 1(d) Analyse, using Table 1.1, the relationship between average weekly hours worked and average weekly wages. Expected relationship – they would move in the same direction (1). Reason for expected relationship – more hours to produce more output (1). Evidence in support of expected relationship - data does not support expected relationship (1). Evidence against expected relationship – wages increase (1) hours fall / hours stay same (1) workers getting paid more per hour (1). 5 A pattern of analysis is expected in response to this type of question. If there is no expected pattern of analysis, the following may be worthy of some reward, e.g.: less hours worked will lead to workers becoming more productive; therefore earning more (1) 1(e) Explain, using information from the extract, one reason for differences in earnings between different jobs in New York. • diiferent skills required / lower productivity (1) higher skill leads to higher pay (1) • discrimination (1) men paid more than women / male- dominance in the financial sector leads to higher pay for men (1) • different industries (1) finance paid more than in education (1) 2 Question Answer Marks Guidance 1(f) Explain, using information from the extract, the possible negative effects of economic growth in New York. • pay gap widening/inequality (1) creating more social tensions (1) reducing productivity due to dissastisfaction (1) • external costs / environmental problems (1) increased pollution (1) lack of green, open space (1) • risk of financial crisis / recession (1) bank runs/asset bubbles bursting (1) lack of job security (1) • more people move to New York for employment (1) increasing the shortage of affordable homes (1) increasing housing prices (1) 4 Question Answer Marks Guidance 1(g) Discuss the advantages and disadvantages of a city having a large tertiary sector. Up to 3 marks for advantages: Generates economic growth (1) high value output (1). Generates jobs (1) leading to low unemployment (1). Tertiary sector has high productivity (1) high pay (1) which can lead to increased consumer spending (1). Encourages foreign investment (1) more capital spending (1) may also encourage financial investment (1). Less pollution (1) no need for factories which creates lots of external costs (1). Low transport costs (1) not having to move raw materials (1). Can export services (1) improve the current account of the balance of payments (1). More tax revenue (1) government can spend more on e.g. healthcare (1). Up to 3 for marks for disadvantages: Limited job choices (1) no manufacturing/agricultural jobs (1). Risk of specialising (1) overdependence on other economies (1). Inequality (1) not all will be able to get jobs in high-paying services such as finance (1) need high qualifications to get high pay (1). Congestion/transport problems (1) overcrowding (1) high house prices/housing shortage (1). 5 Apply this example to all questions with the command word DISCUSS (1g, 1h, 2d, 3d, 4d and 5d) Each point may be credited only once, on either side of an argument, but separate development as to how/why the outcome may differ is rewarded. Generic example mark Tax revenue may decrease« 1 because of reason e.g. incomes may be lower. 1 Tax revenue may increase because incomes may be higher i.e. reverse of a previous argument. 0 Tax revenue may increase because of a different reason i.e. not the reverse of a previous argument e.g. government spending on subsidies may stimulate the economy more than spending on education. 1 Application can be made to the financial sector, but it is not essential. Question Answer Marks Guidance 1(h) Discuss whether or not opening up to free trade benefits an economy. Up to 4 marks for how it might: Opening up to free trade will increase choices from imports (1) obtain products cannot produce (1) reduce prices (1) standards of living increases (1). More competition from imports (1) improve quality (1) increase productivity (1). Encourage more foreign investments (1) increase employment / decrease unemployment (1) increase capital spending (1) increase innovation (1) May increase the opportunity of specialisation (1) increase exports (1) increase GDP/GDP per capita/income (1). Avoid retaliation (1) that can occur if trade restrictions are imposed (1). Up to 4 for marks for how it might not: Domestic producers might be adversely affected (1) can’t compete with foreign firms (1) who might be more cost competitive (1) unemployment increases (1). Increase imports (1) will increase current account of the balance of payment deficit (1). May become dependent on other countries (1) they may gain monopoly power (1). Free trade may involve the removal of tariffs (1) reducing government revenue (1) 6

This question in 0455/21 Oct/Nov 2019

6 A local manufacturer of medicines (pharmaceuticals) in Nigeria wants to expand which will increase the contribution of this industry to the Gross Domestic Product (GDP) of the country. This firm’s expansion may enable Nigeria to reduce its dependence on imports of medicines and may make medicines more affordable. To ensure success, however, the firm will need to increase its investment in research and development. (a) Define Gross Domestic Product (GDP). [2] (b) Explain two ways in which more affordable medicines can improve standards of living. [4] (c) Analyse how investment in research and development (R&D) can help a firm to grow in size. [6] (d) Discuss whether or not a reduction in imports is beneficial to an economy. [8]

20 marks

Mark scheme: 6(a) Define Gross Domestic Product. GDP measures the (total) output/income/expenditure (1) of a country/economy (1). 2 6(b) Explain two ways in which more affordable medicines can improve standards of living. • more people can have medicines (1) improve health (1) raise productivity / enable people to work / not off work sick (1) • different choice of medicines (1) consumers can find what suits them best (1) • hospitals will have more medicines (1) easier to treat those who are ill/reduce death rate (1) • less spent on healthcare (1) can spend more on other things that can improve standard of living such as education, holidays (1) • higher productivity (1) higher incomes (1) 4 Accept higher HDI if linked to improved life expectancy (1). Do not accept birth control or birth rate explanation. 6(c) Analyse how investment in research and development can help a firm to grow in size. More innovation (1) e.g. Faster machines (1) increase productivity (1) decrease cost of production (1) decrease price of products (1) increase demand (1) increase market share (1) increase profits (1) more reinvestments (1). New products produced (1) larger exports (1) enter new markets (1) at start no direct competition (1) may be high demand (1). More skilled workers needed (1) creating a bigger workforce (1) Provide information (1) influence what is produced (1). 6 Question Answer Marks Guidance 6(d) Discuss whether or not a reduction in imports is beneficial to an economy. Up to 5 marks for why it might be: Reduction in imports may improve the trade in goods / trade in goods and services balance (1) this will improve the current account position / reduce a current account deficit (1) this may reduce a country’s debts (1) avoid downward pressure on the exchange rate (1). Spending on imports may be replaced by spending on domestically produced products (1) this would increase the country’s output / cause economic growth (1) this would increase demand for labour (1) raise employment / reduce unemployment (1) increase incomes and living standards (1). Fewer imports may enable infant industries to grow (1) may protect declining strategic industries (1). May prevent dumping (1) explanation of what is meant by dumping (1) Imports may be harmful products (1) might affect people’s health (1). Up to 5 marks for why it might not be: Imports of capital goods / raw materials may decline (1) these might be cheaper / lower quality than domestically produced capital goods and/or raw materials (1) this will raise costs of production (1) make the country’s products less internationally competitive (1) lower output/reduce economic growth (1) worsen the current account position (1) raise unemployment (1). Fewer imports may reduce choice (1) reduce competition (1) may raise prices (1) lower quality of people’s lives (1). Exports may be falling by more than imports (1) so current account position may be worsening (1). Quantity of imports may be falling but value of imports may be rising (1). 8 Question Answer Marks Guidance 6(d) If the reduction is caused by protectionist measures (1) this would reduce benefits of free trade (1). Loss of tariff revenue (1) may be a major source of tax revenue/reduce amount that can be spent on e.g. education (1). Imports may be of beneficial products (1) not produced in the country (1).

This question in 0455/21 Oct/Nov 2019

4 Mali is a developing country. Its Human Development Index (HDI) rose from 0.297 in 2000 to 0.442 in 2016. Most of Mali’s workers are employed in agriculture and cotton is the country’s main agricultural crop. The country’s main export, however, is gold. The country is the third largest exporter of gold in Africa. (a) Identify two components of the HDI. [2] (b) Explain how the proportion of a country’s resources devoted to the primary, secondary and tertiary sectors change as its economy develops. [4] (c) Analyse, using a demand and supply diagram, how a fall in the price of cotton would affect the market for cotton shirts. [6] (d) Discuss whether or not an increase in the size of a country’s gold mining industry will benefit an economy. [8]

20 marks

Mark scheme: 4(a) Identify two components of the HDI. • GDP (GNI) per head / income per head / average income • education • life expectancy 2 For education accept (adult) literacy. 4(b) Explain how the proportion of a country’s resources devoted to the primary, secondary and tertiary sectors change as its economy develops. A smaller proportion of resources are likely to be devoted to the primary sector (1) increases in technology / productivity / education requires fewer resources / resources move to more financially rewarding uses / use of more machinery (1). A greater proportion of resources are devoted to manufacturing at first (1) and then a smaller proportion (1) the manufacturing sector becomes more efficient (1). The service sector continues to grow (1) in developed economies, most labour is employed in the service sector (1). Some developing countries’ tertiary sector has grown faster than secondary sector – jumped a stage (1). 4 Question Answer Marks Guidance 4(c) Analyse, using a demand and supply diagram, how a fall in the price of cotton would affect the market for cotton shirts. Up to 4 marks for the diagram: Axes correctly labelled – price and quantity or P and Q (1). Demand and supply curves correctly labelled (1). Supply curve shifted to the right (1). Equilibriums – shown by lines or e.g. E1 and E2 (1). Up to 2 marks for written analysis: A fall in the price of cotton will reduce the cost of producing cotton shirts (1) price will fall / quantity will rise (1). Do not reward analysis marks for description of diagram e.g. quantity changes from Q1 to Q2. 6 S2 S1 Q1 Q2 P2 P1 D O quantity of cotton shirts price of cotton shirts Question Answer Marks Guidance 4(d) Discuss whether or not an increase in the size of a country’s gold mining industry will benefit an economy. Up to 5 marks for why it might: It may provide more jobs (1) reduce unemployment (1). It may increase output / cause economic growth (1) increase wages (1) increase living standards (1). Some of the gold may be exported (1) improve the current account position (1). The industry may experience (external) economies of scale (1) lower average cost (1) example of an external economy (1). It will be more beneficial if world demand is increasing (1). May attract multinational companies to set up in the country (1). Tax revenue may increase (1) enabling government to spend more on e.g. infrastructure (1). Up to 5 marks for why it might not: A rise in the supply of gold may reduce its price (1) reduce revenue (1) reduce exports (1). External costs may be created (1) damage to the natural environment / pollution (1). The industry may experience (external) diseconomies of scale (1) higher average cost (1) example of an external economy (1). Mining is a dangerous occupation (1) wages may be low as primary sector (1) jobs may be unskilled (1). Resource of gold may be depleted (1) stopping future generations being able to take advantage of them (1). It will be less beneficial if other gold producing countries are increasing their output (1). 8

This question in 0455/22 Oct/Nov 2019

4 Australia’s economic growth rate has fallen in recent years. Its Human Development Index (HDI), however, is high and in 2016, Australia had the second highest HDI in the world. The Australian government hopes that the country’s birth rate will rise from a low of 12.1 in 2016. An increasing proportion of Australian children are going to private sector schools. Their parents have to pay a fee for them to attend these schools. (a) Identify the difference between economic growth and recession. [2] (b) Explain how the HDI compares living standards between countries. [4] (c) Analyse the effects of a rise in a country’s birth rate. [6] (d) Discuss whether or not parents should have to pay a fee to send their children to school. [8]

20 marks

Mark scheme: 4(a) Identify the difference between economic growth and recession. • Economic growth is an increase in GDP/output (1). • Recession is a fall in GDP/output / negative economic growth (1). 2 4(b) Explain how the HDI compares living standards between countries. • Measures output/income/material standard of living (1) GDP/GNI per head (1). • Measures healthcare (1) life expectancy (1). • Measures education (1) mean and expected years of schooling / literacy rate (1). • Provides an index figure for each country (1) from 0 to 1 / divides countries into very high, high, medium and low (1). • Higher HDI means higher standard of living (1). 4 4(c) Analyse the effects of a rise in a country’s birth rate. • In the short run, fewer women may be able to work (1) which will decrease the size of the labour force (1) more children (1) increases the dependency ratio (1) putting pressure on the working population (1). • In the longer run there will be more workers (1) this may decrease the dependency ratio (1) population size may increase (1) increase output (1) encourage investment (1). • Government will have to devote more resources e.g. to primary education / childcare / support families (1) this may mean fewer resources can be devoted to e.g. improving living standards (1). • Higher demand for industries related to young children e.g. baby clothes, child minding (1) may reduce unemployment (1). • Increase in population/ overpopulation (1) causes a strain on resources (1) fall in living standards (1). • If birth rate still lower than death rate (1) will still have an ageing population (1). 6 Reward but do not expect reference to the optimum population. Question Answer Marks Guidance 4(d) Discuss whether or not parents should have to pay a fee to send their children to school. Up to 5 marks for why they should: • Some parents can afford to pay (1) some parents will work hard to pay (1) paying may make them more prepared to demand good standards (1) would see themselves as consumers (1). • May result in more resources being devoted to education (1) teachers reive higher pay (1) and motivated to work harder (1) parents demand high standards for their money (1) improving outcomes (1). • Education provides private benefits (1) in the form of higher pay (1) more career choice (1). • The government paying for education (1) involves an opportunity cost (1) e.g. spending on healthcare (1). • A fee may be charged for secondary education but not primary education (1) if it is considered a basic level of education should be available to all (1) parents may choose to pay for education if they think it will be of high quality (1). Up to 5 marks for why they should not: • Some parents may not send their children to school (1) some will not be able to afford to (1) some may undervalue education (1) may reduce desire to have children (1). • Opportunity cost to parents (1) e.g. less spending on other goods / services (1). • It would increase income inequality (1) price would take a higher percentage of the income of the poor (1) less educated workforce (1) lower standard of living (1). • Education provides external benefits (1) higher productivity (1) higher output/GDP (1) these could be lost (1) • The government may need to provide education free to ensure the right quantity of education is consumed (1) that the poor have access to education (1). 8 Reward but do not expect reference to education being a merit good.

This question in 0455/23 Oct/Nov 2019

1 (a) Calculate India’s economic growth rate in 2017. [1] (b) Identify two methods of protection. [2] (c) State why India is a mixed economy. [2] (d) Explain why external costs cause market failure. [4] (e) Draw a demand and supply diagram to show the effects of a decrease in the costs of production on the market for cars. [4] (f) Analyse the relationship between the size of countries’ primary sector output and GDP per head. [5] (g) Discuss whether or not increasing subsidies given to bus travel would reduce pollution in India. [6] (h) Discuss whether or not India is likely to experience a deficit on the current account of its balance of payments in the future. [6]

30 marks

Mark scheme: 1(a) Calculate India’s economic growth rate in 2017. 7% (1). 1 1(b) Identify two methods of protection. One mark each for any two from: • tariff • quota 2 1(c) State why India is a mixed economy. It has a private sector / private sector firms (1) and a public sector / public sector firms /government intervention (1). 2 1(d) Explain why external costs cause market failure. Logical explanation which might include: External costs are not considered (1) base decisions just on private costs and benefits (1). They cause harmful effects to third parties / negative side effects (1) they result in overconsumption (1) and overproduction (1). Their existence may mean that social costs exceed social benefits (1). Examples of causes or costs: e.g. driving, pollution / environmental damage, burning fields and mining (up to 2). They result in a misallocation of resources / inefficient use of resources (1). 4 Question Answer Marks Guidance 1(e) Draw a demand and supply diagram to show the effects of a decrease in the costs of production on the market for cars. Axes correctly labelled – price and quantity or P and Q (1). Demand and supply curves correctly labelled (1). Supply curve shifted to the right (1). Equilibriums – shown by lines P1, P2 / Q1, Q2: or marking the equilibrium points E1 and E2 (1). 4 Question Answer Marks Guidance 1(f) Analyse the relationship between the size of countries’ primary sector output and GDP per head. Coherent analysis which might include: Generally, the countries with the relatively smallest primary sectors have the highest GDP per head / inverse relationship (1). Evidence e.g. US has only 1% of output accounted for by the primary sector and the highest GDP per head (1) another piece of supporting evidence e.g. the two countries with the largest primary sectors have the lowest GDP per head (1). Exception is India/Philippines (1) India has a smaller relative sized primary sector but a lower GDP per head (1). This is the expected relationship as primary sector tends to decline as an economy develops / often larger in developing economies / resources move into secondary and then tertiary sectors (1) tertiary sector tends to generate higher incomes / primary sector tends to generate lower incomes (1). 5 Question Answer Marks Guidance 1(g) Discuss whether or not increasing subsidies given to bus travel would reduce pollution in India. Award up to 4 marks for logical reasons why it might, which may include: • subsidies reduce costs (1) increase supply (1) lower prices (1) raise quality of bus travel (1) and cause demand to extend / higher demand (1) • people using buses will reduce the volume of traffic/reduce congestion (1) • buses use cleaner fuel (1). Award up to 4 marks for logical reasons why it might not, which may include: • people may not switch from car to bus travel (1) price of cars may fall (1) cost of producing cars is declining (1) other reason why e.g. more comfortable / door to door (1). • providers of bus transport may not pass on much of the subsidies in the form of lower prices (1) • opportunity cost of using subsidies (1) could spend money on other ways to reduce pollution e.g. education (1) • economy is growing so incomes rising (1) both bus and car travel may increase (1). 6 Apply this example to all questions with the command word DISCUSS (1g, 1h, 2d, 3d, 4d and 5d) Each point may be credited only once, on either side of an argument, but separate development as to how/why the outcome may differ is rewarded. Generic example mark Tax revenue may decrease… 1 ...because of reason e.g. incomes may be lower. 1 Tax revenue may increase because incomes may be higher i.e. reverse of a previous argument. 0 Tax revenue may increase because of a different reason i.e. not the reverse of previous argument e.g. government spending on subsidies may stimulate the economy more than spending on education. 1 Reward application of subsidies to producers and/or consumers. Increase in supply, lower prices, extension in demand may be shown on a demand and supply diagram. Question Answer Marks Guidance 1(h) Discuss whether or not India is likely to experience a deficit on the current account of its balance of payments in the future. Award up to 4 marks for logical reasons why it might, which may include: • there was a deficit in 2016 and 2017 (1) and it was on an upward trend (1) • incomes are rising / economic growth is occurring (1) and so more imports may be purchased both by consumers and by firms (1) • it is expected that the exchange rate will rise (1) this may increase the price of exports (1) and demand for exports may fall (1) price of imports may fall (1) so demand for imports may rise (1) • Indian trade restrictions may be reduced / Indian government promoting free trade (1) which may increase imports (1). • tax rates may be cut (1) with more disposable income (1) people may buy more imports (1). Award up to 4 marks for logical reasons why it might not, which may include: • there may be more foreign tourists (1) if pollution declines (1) • lower tariff on imported raw materials / imported capital goods (1) may reduce costs of production (1). • other countries may remove their trade restrictions (1) allowing India’s exports to rise (1) • if the government does spend more on education (1) productivity may rise (1) and India’s products may become more price and quality competitive (1). • MNCs may be attracted for a number of the reasons given (1) MNCs may produce exports / import substitutes (1). • Higher investment (1) may raise quality of exports / domestic products (1) lower price of exports (1). • Car production is rising (1) more cars may be exported / fewer cars may be imported (1). 6

This question in 0455/22 Feb/March 2020

4 African countries are expected to experience growth in their output. It is also predicted that Africa’s population will increase from 1.1 bn in 2017 to 4.2 bn by 2100, when Nigeria will account for one in twelve of the world’s births. Nigeria and South Africa are expected to experience the greatest rise in investment (spending on capital goods) over this period, and a change in their gender distribution. (a) Define gender distribution. [2] (b) Explain two benefits of a higher economic growth rate. [4] (c) Analyse the disadvantages of a rapidly growing population. [6] (d) Discuss whether or not a cut in the rate of interest will increase investment. [8]

20 marks

Mark scheme: 4(a) Define gender distribution. The number of males compared to the number of females in the population / the ratio of males to females in the population (2). The sex distribution / sex ratio (1). 2 4(b) Explain two benefits of a higher economic growth rate. Logical explanation which might include: Higher incomes / output (GDP) / spending (1) better living standards (1) Reduced poverty (1) able to afford basic necessities / more goods and services available (1) Reduced unemployment (1) more jobs created (1) Increased tax revenue (1) providing more funds to spend on education/healthcare (1) Higher confidence (1) increase investment (1). Attract MNCs (1) due to higher total (aggregate) demand (1). Higher exports (1) may exceed higher imports / may improve the current account position (1). Increase the country’s economic power (1) e.g. in trade negotiations (1). 4 One mark for each of two benefits identified and one mark for each explanation. Question Answer Marks Guidance 4(c) Analyse the disadvantages of a rapidly growing population. Coherent analysis which might include: A rapidly growing population may deplete resources more quickly (1) reducing the country’s ability to grow in the future / reduce the sustainability of growth (1) A rapidly growing population may take the population beyond the optimum level / overpopulated (1) reducing income / GDP per head (1) may cause overcrowding (1). May be pressure on food supplies (1) pollution may increase (1) may put pressure for government spending to rise (1). A rapidly growing population will increase dependents (1) if due to a rise in the birth rate (1) more resources will have to be devoted to providing e.g. primary education (1) some parents may leave the labour force (1). If the rise in population is due to a fall in the death rate (1) more pensions may have to be provided (1) increased cost of healthcare (1) taxes may have to be raised (1) If the rise is due to net immigration (1) there may be an increased burden on housing and healthcare (1). 6 Question Answer Marks Guidance 4(d) Discuss whether or not a cut in the rate of interest will increase investment. In assessing each answer, use the table opposite. Why it might: • it may increase consumer spending as there will be less reward from saving, which may encourage firms to increase their output • it will reduce the cost of borrowing to purchase capital goods • firms may be encouraged to invest rather than save • MNCs may be attracted into the country as investment will be cheaper. Why it might not: • the rate of interest may still be high / may be expected to rise in the future • firms may be pessimistic about the future • firms may be working with spare capacity • the cost of capital equipment may rise • lower saving may reduce funds available for investment • banks may be reluctant to lend. Example of a Level 2 answer: A cut in the rate of interest will decrease the cost of taking out loans. This will enable firms to borrow more and lead to them buying more capital goods which will increase investment. The return on saving would also reduce, encouraging firms to spend their money rather than save it as the opportunity cost of spending would be lower. Lower interest rates might also mean that consumer spending is greater so firms’ profits may increase enabling them to expand. Principal Examiner comment: This answer provides strong and relevant links, but it is clearly only one- sided so can only achieve a maximum of L2. 8 Level Description Marks 3 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 Question Answer Marks Guidance 4(d) Level Description Marks 2 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 1 There is a simple attempt at using economic definitions and terminology. Some reference may be made to economic theory, with occasional understanding. 1–2 0 A mark of zero should be awarded for no creditable content. 0

This question in 0455/22 Feb/March 2020

1 (a) Calculate the total number of people over 60 years old in Greece in 2015. [1] (b) Explain what is meant by an unemployment rate of 24%. [2] (c) Identify two reasons for the recovery of the European economies, other than Greece. [2] (d) Explain the two supply-side policy measures being used by the Greek government. [4] (e) Analyse how two of Greece’s population trends may have affected its economy. [4] (f) Analyse the relationship between Greece’s GDP per head and its HDI value. [5] (g) Discuss whether or not having a strong foreign exchange rate is a problem for Greece’s economy. [6] (h) Discuss whether or not a market economic system improves living standards. [6]

30 marks

Mark scheme: Question Answer Marks 1(a) Calculate the total number of people over 60 years old in Greece in 1 2015. 27% × 10.8 million = 2.92 million 1(b) Explain what is meant by an unemployment rate of 24%. 2 Logical explanation which might include: 24% of the total labour force (1) is actively searching for jobs (willing and able to work) but cannot find work/job (1) 1(c) Identify two reasons for the recovery of the European economies, 2 other than Greece. successful supply-side policy measures (1) improving global economy (1) 1(d) Explain the two supply-side policy measures being used by the Greek 4 government. Logical explanation which might include: labour market reforms (1) making it easier to hire and fire workers / giving workers more skills to enable them to take various jobs / making it easier for workers to move from one place to another or one job to another (1) Privatisation (1) increasing efficiency due to the profit-maximising motive (1) 1(e) Analyse how two of Greece’s population trends may have affected its 4 economy. Coherent analysis which might include: The Greek population has been falling ever since 2010 (1) resulting in a smaller labour force (1). Ageing population (1) increase in dependency ratio (1). Emigration (1) loss of skilled workers (1). 1(f) Analyse the relationship between Greece’s GDP per head and its HDI 5 value. Coherent analysis which might include: Greece’s GDP per head has been falling from 2010–2015 (1) but HDI has been increasing (1) negative relationship (1) data for GDP per head (1) data for HDI value (1). This could be because of improving education (1) and healthcare (1). HDI consists of GDP per head / education / health (1) hence even though GDP per head is falling this is more than offset by rise in education / health (1). 1(g) Discuss whether or not having a strong foreign exchange rate is a 6 problem for Greece’s economy. Generic example mark Tax revenue may decrease… 1 ...because of reason e.g. incomes may be lower. 1 Tax revenue may increase because incomes may be higher i.e. 0 reverse of a previous argument. Tax revenue may increase because of a different reason i.e. not the reverse of a previous argument e.g. government spending on 1 subsidies may stimulate the economy more than spending on education. Up to 4 marks for why it might be a problem: Strong foreign exchange rate will lead to high price of exports (1) decreasing the quantity demanded for exports (1) decreasing value of exports (1) strong foreign exchange rate will lead to low price of imports (1) increasing the quantity demanded for import (1) increasing value of imports (1) decreasing net exports (1) decreasing total demand (1) decreasing economic growth (1) decreasing employment (1). Up to 4 marks for why it might not be a problem: Strong foreign exchange rate will lead to low price of imported raw materials, machines / capital, or semi manufactured goods (1) this could decrease cost of production (1) decreasing the price of domestically produced goods (1) increasing demand / consumption / exports (1) increasing total demand (1) increasing economic growth (1) increasing employment (1) 1(h) Discuss whether or not a market economic system improves living 6 standards. Up to 4 marks for why it does improve living standards: Economic freedom (1) consumers and producers can make their own decisions on what to consume and produce (1) no government intervention enables more efficient allocation of resources (1) firms react to the wants of consumers to gain profits for themselves then consumers are fairly likely to get what they want and gain high levels of satisfaction from their income (1) costs are lower and prices are lower (1) more affordable (1). Up to 4 marks for why it does not improve living standards: Instability and uncertainty (1) Unemployment especially when there is a recession (1) high inflation could decrease affordability (1) monopolies exploit consumers (1) workers paid low wages (1) pollution and other external costs (1) Unequal distribution of income and wealth (1) under provision of public goods (1).

This question in 0455/23 May/June 2020

2 In Nagicho, a small town in Japan, a woman on average has 2.8 children in her lifetime. In Japan as a whole, a woman on average only has 1.4 children in her lifetime. Nagicho’s higher birth rate is partly the result of a lower cost of living for families, as the prices of basic items are lower in Nagicho than in the rest of Japan. The local government not only offers housing at subsidised rates, to get more labour into the area, but also tries to get more investment into the town. (a) State two functions of local government. [2] (b) Explain how a lower cost of living can encourage population growth. [4] (c) Analyse the influences on the mobility of two factors of production. [6] (d) Discuss whether or not increased investment is beneficial to an economy. [8]

20 marks

Mark scheme: 2(a) State two functions of local government. 2 • providing public goods • providing street lights • local recreation activities • cleaning • waste collection and management • infrastructure investment • providing tax incentive • zoning • provision of low income housing • supporting local businesses 2(b) Explain how a lower cost of living can encourage population growth. 4 Logical explanation which might include: Cheaper to bring up a child (1) education and healthcare cost lower or any other example (2) parents don’t have to work so hard (1) more time to raise children (1). Lower cost of living could lower death rate (1) as healthcare is more affordable (1) and people can live longer (1). Lower cost of living could encourage net migration (1) cheaper to live in that country (1). 2(c) Analyse the influences on the mobility of two factors of production. 6 Coherent analysis which might include: Availability of proper infrastructure (1) to move from place to place (1) e.g. trains / roads (1) whether it is affordable or not (1). Cost of living differences (1) whether workers can afford to move to another place (1) e.g. housing costs, cost of education (1). Availability of information (1) on jobs elsewhere (1). Tax rate changes (1) lower tax rates could encourage workers to move to another country to take advantage of lower taxes (1) / entrepreneurs could be encouraged to move to a lower tax economy (1). Regulation changes (1) could limit movement of labour or capital (1). Level of education (1) could make labour more occupationally mobile (1). No reward for only identifying the factors of production. Accept other relevant factors e.g. cultural differences (up to 3 marks each). 2(d) Discuss whether or not increased investment is beneficial to an 8 economy. In assessing each answer, use the table opposite. Level Description Marks 3 A reasoned discussion which accurately examines both 6–8 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. 2 A reasoned discussion which makes use of economic 3–5 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. 1 There is a simple attempt at using economic definitions 1–2 and terminology. Some reference may be made to economic theory, with occasional understanding. 0 A mark of zero should be awarded for no creditable 0 content. Why it might be beneficial: • Investment is the purchasing of capital goods which increase a country’s productive capacity / supply-side capacity of the economy • Investment increase total demand • Investment increase demand for workers, decrease unemployment, increase income • Increase spending on research and development and increase productivity • Create economic growth Why it might not be beneficial: • Investments may lead to inflation (demand-pull) in the short run • Investments on capital goods has an opportunity cost of consumer goods production • Investments sacrifices current living standards for future living standards • Foreign investments might be very uncertain – knows no loyalty – very mobile. • Capital goods may be a substitute for labour, which creates unemployment.

This question in 0455/23 May/June 2020

1 (a) Calculate Turkey’s total output. [1] (b) Identify two factors that affect borrowing in an economy. [2] (c) Explain the relationship between the growth of Istanbul’s service sector and its growth in total output. [3] (d) Explain two reasons for Istanbul’s increased population. [4] (e) Analyse how good transport links have contributed to Istanbul’s economic growth. [4] (f) Draw a demand and supply diagram to show the effects on flights to Turkey of greater worries about safety for tourists. [4] (g) Discuss whether or not Istanbul benefits from investment by MNCs. [6] (h) Discuss whether or not competition is beneficial for airlines. [6]

30 marks

Mark scheme: 1(a) Calculate Turkey’s total output. $320 billion 1 1(b) Identify two factors that affect borrowing in an economy. • interest rates • confidence levels • wages / incomes 2 1(c) Explain the relationship between the growth of Istanbul’s service sector and its growth in total output. Logical explanation which might include: Higher growth in service sector leads to higher total economic growth (1). This is expected as countries become more developed, the share of services increases (1) and the share of primary sector decreases (1). For example, in 2011, the service industry grew most rapidly at 28.16% and the total economic growth was 21.9% (1). However, although growth of service sector was lowest in 2010 at 11.9%, total growth was 14.38% (1), higher than in 2014 where growth of service sector was higher (1). 3 1(d) Explain two reasons for Istanbul’s increased population. Logical explanation which might include: People moving from rural areas to the city centre (1) e.g. for higher wages / more employment opportunities / better housing / low cost of living / good transport links (1). Improved healthcare (1) longer life expectancy / lower infant mortality / higher quality of life (1). 4 One mark for each of two reasons identified and one mark for each of two explanations. Question Answer Marks Guidance 1(e) Analyse how good transport links have contributed to Istanbul’s economic growth. Coherent analysis which might include: Good roads could lead to reduction in commute time (1) good roads / air transport leads to faster transport of goods and services (1). Workers can move easily / higher labour mobility (1) reduce unemployment (1). More competition in the labour market (1) more competition in the product market (1) could lead to fall in cost of production (1) increase in productivity (1). Easy to conduct business internationally due to good air transport links (1) access to huge international market (1) e.g. 1.5 billion people within a flight time of 4 hours (1) may have attracted MNCs (1). Contributed to the growth of the transport industry (1) allowing transport firms to take greater advantage of economies of scale (1). 4 1(f) Draw a demand and supply diagram to show the effects on flights to Turkey of greater worries about safety for tourists. Up to 4 marks for the diagram: Axes correctly labelled – price and quantity or p and q (1) Original demand and supply curves correctly labelled (1) Demand curve shifts to the left (1) Equilibriums – shown by lines P1 and Q1 and P2 and Q2, or by labelling equilibrium points as E1 and E2 (1). 4 O Question Answer Marks Guidance 1(g) Discuss whether or not Istanbul benefits from investment by MNCs. Up to 4 marks for why it may be beneficial: Increased investment leads to increased total demand (1) leads to economic growth (1). Increase demand for workers in Istanbul (1) decreasing unemployment rates (1) increasing incomes (1) and increasing standards of living (1). Bring new / better technology (1) increase productive capacity / productivity (1) Increase variety of products on sale (1) produce new products (1) Increase tax revenue (1) allowing local government to spend more on e.g. roads (1). Up to 4 marks for why it may not be beneficial: Replace domestically owned firms in Istanbul / decrease demand for domestic firms (1) MNCs may be more efficient than domestic firms (1) leading to failure of domestic firms / decrease demand for domestic firms (1) monopoly of MNCs (1). Profits leave the country (1) not reinvested domestically (1). MNCs may exploit workers (1) such as low wages (1) poor working conditions (1). MNCs may exploit environment (1) e.g. pollution (1). 6 Apply this example to all questions with the command word DISCUSS (1(g), 1(h), 2(d), 3(d), 4(d) and 5(d)) Each point may be credited only once, on either side of an argument, but separate development as to how/why the outcome may differ is rewarded. Generic example mark Tax revenue may decrease … 1 ... because of reason e.g. incomes may be lower. 1 Tax revenue may increase because incomes may be higher i.e. reverse of a previous argument. 0 Tax revenue may increase because of a different reason i.e. not the reverse of a previous argument e.g. government spending on subsidies may stimulate the economy more than spending on education. 1 Question Answer Marks Guidance 1(h) Discuss whether or not competition is beneficial for airlines. Up to 4 marks why it is beneficial: Competition will lead to airline being forced to be more efficient (1) productivity increase (1) use latest technology (1) reduce wasteful spending (1) quality increases (1) cost of production goes down (1) prices become more affordable (1) increase in quantity demanded (1) total revenue and profit increases (1). Up to 4 marks why it is not beneficial: Too much competition means less market share for each airline (1) less quantity demanded (1) airlines may have to advertise more (1) increase cost of production (1) total revenue and profit decreases (1) airlines who can’t compete may go bankrupt / leave the market (1). Too much competition may result in the airline being small (1) cannot take advantage of economies of scale (1). An airline may not benefit from becoming more competitive (1) because of brand loyalty (1) lower demand for air travel (1). 6

This question in 0455/21 Oct/Nov 2020

3 Among the reasons for Malaysia’s continued economic growth are rises in consumer spending and the country’s ability to adapt to changes in global demand. For example, when the price of natural rubber fell, most rubber plantations changed to palm oil production. The government has tried to promote the growth of different sectors, including the primary sector. (a) State two sectors, other than the primary sector, in an economy. [2] (b) Explain two possible reasons for a fall in the price of a product such as natural rubber. [4] (c) Analyse the influences on spending. [6] (d) Discuss whether or not the growth of the primary sector is beneficial to a country. [8]

20 marks

Mark scheme: 3(a) State two sectors, other than the primary sector, in an economy. Secondary sector (1) Tertiary sector (1) 2 Reward but do not expect the quaternary sector. 3(b) Explain two possible reasons for a fall in the price of a product such as natural rubber. Logical explanation which might include: Decrease in demand for natural rubber (1) emergence of substitutes (1) decrease in future expected price or any other relevant examples (1). Increase in supply of natural rubber (1) due to increase in number of producers / good yield / relevant example (1). 4 3(c) Analyse the influences on spending. Coherent analysis which might include: Income (1) higher income increases the ability to spend / increases purchasing power (1). The rate of interest (1) a change in the rate of interest influences the proportion of income that is spent and saved (1) and affects borrowing (1). Confidence (1) people spend more when they are optimistic (1) about future income / job security (1). Wealth (1) people can spend some of their wealth (1) e.g. sell shares (1) use it as collateral to borrow (1). Inflation (1) spending may fall if prices rise more than money wages (1) spending may rise as people seek to buy products before they increase in price even further (1). Expansionary fiscal / monetary policy may increase spending (1). 6 Question Answer Marks Guidance 3(d) Discuss whether or not the growth of the primary sector is beneficial to a country. In assessing each answer, use the table opposite. Why it is beneficial: • can increase total output of the economy, increasing economic growth • can provide employment opportunities that are accessible to all / requires low skill / requires low technology • could increase standards of living in rural areas • provide raw materials for secondary sector • could ensure that country has food security, reduce imports of necessities, if prices of primary sector products are high e.g. high oil price which this could bring huge export revenue to the country. This could reduce current account deficit. Why it is not beneficial: • productivity may be low in the primary sector, very low value added • may be low wages and poor working conditions • overdependence on primary sector may restrict growth of secondary and tertiary sectors • some primary industries may be disrupted by weather conditions and natural disasters • supply and demand are inelastic so there may be considerable price fluctuations • natural resources e.g. copper may be depleted. 8 Level Descriptors Mark 3 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 2 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 or may be one-sided. There is relevant use of economic concepts, terminology, information and data appropriate to the question. 3–5 1 There is a simple attempt at using economic definitions and terminology. Some reference may be made to economic theory, with occasional understanding. 1–2 0 A mark of zero should be awarded for no creditable content. 0 Question Answer Marks Guidance 3(d) Example of an L1 answer: Growth of the primary sector may benefit an economy because it uses renewable and non-renewable resources. It provides the raw materials needed by other sectors. Consumers’ demands cannot be fulfilled without the primary sector as it is needed to produce all goods and services. It may not be as beneficial as other sectors as wages are lower and natural resources may eventually become depleted. Principal Examiner comment: A few relevant identifications.

This question in 0455/21 Oct/Nov 2020

4 South east Asian countries have reduced tariffs between themselves through the ASEAN Free Trade Agreement. ASEAN member countries are also removing non-tariff methods of protection. The intention is to raise economic growth through more international trade. This should enable small and medium-sized firms in ASEAN countries to grow and increase their exports. (a) Define tariffs. [2] (b) Explain two non-tariff methods of protection. [4] (c) Analyse, using a production possibility curve (PPC) diagram, the beneficial effects for a country of the growth of its small and medium-sized firms. [6] (d) Discuss whether or not increased international trade can promote economic growth. [8]

20 marks

Mark scheme: 4(a) Define tariffs. Tariffs are a tax (1) on imports/exports (1) which increase the price of imported/exported goods (1). 2 4(b) Explain two non-tariff methods of protection. Logical explanation which might include: Quotas (1) quantitative restriction on the amount of imports that can enter a country (1). Subsidies (1) grants given to domestic firms to reduce domestic cost of production and reduce demand for imported goods (1). Embargoes (1) total restriction on a certain product from a certain country (1). 4 Also accept other non-tariff barriers such as rules and regulations, exchange controls, etc. One mark for each of two reasons identified and one mark for each of two explanations. 4(c) Analyse, using a production possibility curve (PPC) diagram, the beneficial effects for a country of the growth of its small and medium-sized firms. Up to 4 marks for the diagram: Axes correctly labelled (1). Initial curve drawn as a curve or downward sloping line to the axes (1). New curve drawn as a curve or downward sloping line to the axes (1). Shift to the right indicated by arrow or lettering (1). Up to 2 marks for coherent analysis which might include: The growth of its small and medium-sized firms will lead to an increase in the number of firms in the economy (1) this will increase productive potential / increase productive capacity / cause economic growth (1). 6 Also accept a tilt outward of the new PPC curve. Question Answer Marks Guidance 4(d) Discuss whether or not increased international trade can promote economic growth. In assessing each answer, use the table opposite. Why it may: • increase size of the market for domestically produced goods, increase exports, increase total demand • firms can specialise and achieve economies of scale, decrease cost of production, increase demand for goods and services produced domestically • increase competitive pressure (1) making firms more efficient (1) • increase access to products not available domestically, e.g. raw materials to produce other goods, increase output of an economy (1). Why it may not: • Increase amount of imports, decrease total demand of the economy • domestic firms may not be able to compete causing less revenue, less profits, more unemployment, • may result in shortages of e.g. rice in the domestic market • make the economy more subject to sudden changes in demand and supply. 8 Level Descriptors Mark 3 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 2 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 or may be one-sided. There is relevant use of economic concepts, terminology, information and data appropriate to the question. 3–5 1 There is a simple attempt at using economic definitions and terminology. Some reference may be made to economic theory, with occasional understanding. 1–2 0 A mark of zero should be awarded for no creditable content. 0 Question Answer Marks Guidance 4(d) Example of L2 answer: Increased international trade may not benefit a country because the country may be in a trade deficit as the cost of a country’s imports exceed the total value of its exports. Consumers may purchase more goods and services from abroad than from domestic firms which may reduce economic growth as they make less profit. The value of the currency may fall eventually because more goods and services are being imported instead of exported. Principal Examiner comment: Limited on one side.

This question in 0455/21 Oct/Nov 2020

5 Wage rate growth has increased recently in Kazakhstan, but its economic growth rate has slowed. This is, in part, due to a fall in exports. To try to increase the economic growth rate, the government has increased its spending on investment. In August 2015, it adopted a floating foreign exchange rate system in an attempt to improve the country’s macroeconomic performance. (a) Define wages. [2] (b) Explain two reasons, other than methods of protection, why a country’s exports may fall. [4] (c) Analyse how a rise in investment could increase a country’s economic growth rate. [6] (d) Discuss whether or not a country should switch from a fixed foreign exchange rate system to a floating foreign exchange rate system. [8]

20 marks

Mark scheme: 5(a) Define wages. A payment/reward (1) to labour/workers (1). 2 5(b) Explain two reasons, other than methods of protection, why a country’s exports may fall. Logical explanation which might include: Lower incomes abroad (1) reduce the ability of foreigners to buy the country’s exports / lower demand (1). Rise in the foreign exchange rate (1) will make exports more expensive (1). Quality may fall (1) e.g. educational standards may have declined (1). Price may rise (1) due to inflation/higher costs of production/lower productivity/making exports less competitive (1). Domestic demand may rise (1) products may be switched from the export to the home market (1). Lower output (1) reduce the ability of firms to export as many goods and services / result of fewer resources (1). 4 One mark for each of two reasons identified and one mark for each of two explanations. Question Answer Marks Guidance 5(c) Analyse how a rise in investment could increase a country’s economic growth rate. Coherent analysis which might include: More investment will increase total (aggregate) demand (1) there will be more capital goods (1) these may be more efficient / embody advanced technology (1) productive capacity will increase / productivity rise (1) costs of production may fall (1) prices may fall (1) quality may rise (1) more products may be demanded by domestic consumers (1) foreign buyers / more exports (1) output may increase (1). Higher investment may increase employment (1) raise income (1). Investment in human capital/education/healthcare (1) can raise productivity (1). 6 Question Answer Marks Guidance 5(d) Discuss whether or not a country should switch from a fixed foreign exchange rate system to a floating foreign exchange rate system. In assessing each answer, use the table opposite. Why it should: • the government will not have to devote time and attention to maintaining the exchange rate and so may use policy measures to e.g. reduce inflation • fewer foreign exchange reserves would have to be kept to maintain the exchange rate. These could be used to stimulate economic activity • exchange rate may be lower which may increase economic growth, lower unemployment and improve the current account position. Why it should not: • a lower exchange rate may cause inflation • fluctuations in the exchange rate may create uncertainty. This may discourage investment and reduce economic growth • may discourage MNCs from setting up in the country • a higher exchange rate could reduce economic growth, employment and harm the current account position. 8 Level Descriptors Mark 3 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 2 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 or may be one-sided. There is relevant use of economic concepts, terminology, information and data appropriate to the question. 3–5 1 There is a simple attempt at using economic definitions and terminology. Some reference may be made to economic theory, with occasional understanding. 1–2 0 A mark of zero should be awarded for no creditable content. 0 Question Answer Marks Guidance 5(d) Example of L3 answer: A floating exchange rate changes with changes in demand and supply. A country should switch from a fixed foreign exchange rate system to a floating exchange rate system as there will be no need to keep foreign reserves so it can spend foreign reserves on something else. A country can easily change monetary policy changing interest rate without being worried. It can concentrate on other aims and not the exchange rate. Floating exchange rate automatically adjust current account of the balance of payments as increase in demand for exports will increase exchange rate reducing demand on exports. A country should not switch from fixed foreign exchange rate system to floating exchange rate as speculation could say that the value of local currency will decrease so people will sell it causing value to decrease as it will have lower demand. The uncertainty about export and import prices may discourage MNCs. Principal Examiner comment: Strong on one side and reasonable on the other.

This question in 0455/22 Oct/Nov 2020

2 India has experienced a relatively high economic growth rate in recent years. This growth has been driven by increases in government spending and exports, including exports of textiles. India’s unemployment rate has, however, increased. The government is concerned that trying to reduce unemployment may increase India’s inflation rate. (a) Define economic growth. [2] (b) Explain the possible opportunity cost to India of exporting more textiles. [4] (c) Analyse how higher government spending could increase economic growth. [6] (d) Discuss whether or not a government can reduce unemployment without increasing inflation. [8]

20 marks

Mark scheme: 2(a) Define economic growth. An increase in the country’s / economy’s output (2). An increase in real (1) GDP (1) over time (1). An increase in output (1). An increase in a country’s / economy’s productive capacity (2). An increase in productive potential (1). per head. 2(b) Explain the possible opportunity cost to India of exporting more textiles. Logical explanation which might include: Opportunity cost is the (next) best alternative (1) forgone (1). Textiles that have been exported might have been sold on the home market (1) may have increased choice (1) lowered price (1). Resources may have been moved to producing the textile exports / resources used to produce textiles could have been used to produce other products (1) output / exports of other products may have been reduced (1) these products may provide more revenue / lose revenue from not exporting these products (1). 4 Question Answer Marks Guidance 2(c) Analyse how higher government spending could increase economic growth. Coherent analysis which might include: Higher government spending can increase total (aggregate) demand / government spending is a component of GDP (1). Higher government spending on education and training / healthcare / infrastructure (1) can raise productivity / skills / efficiency / quality of labour (1) attract MNCs (1) increase productive potential (1) lower costs of production (1) increase employment / reduce unemployment (1) lower prices (1) increase output (1) increase exports (1). Government spending on benefits (1) will increase purchasing power of the poor (1) raising consumer expenditure (1). Increased government subsidies (1) could reduce costs of production (1) increase investment (1) increase profits (1) provide an incentive for firms to produce more (1). 6 A maximum of 3 marks for a list-like approach. Question Answer Marks Guidance 2(d) Discuss whether or not a government can reduce unemployment without increasing inflation. In assessing each answer, use the table opposite. Why it might: • workers who have been unemployed for some time may accept jobs without a rise in wages • government spending on education and training may increase both total (aggregate) demand and total (aggregate) supply / may reduce costs of production • government subsidies may encourage firms to produce more and take on more workers and lower prices • tax revenue may be raised to finance any increase in government spending • government may reduce trade union power which could encourage employers to take on more workers Why it might not: • may increase total (aggregate) demand causing demand-pull inflation • inflation more likely to occur if economy is initially close to full employment • may increase wages and costs of production, causing cost-push inflation • cuts in taxes may not lead to higher consumer expenditure and investment if there is a lack of confidence • government may instruct central bank to lower foreign exchange rate which could increase price of imports 8 Level Description Marks 3 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 2 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 Question Answer Marks Guidance 2(d) Example of L3 Answer Yes, a government can reduce unemployment without increasing inflation. If the government spends money on training and education more people would be skilled enough to do jobs and firms would hire more people due to the return from greater productivity. This would also increase the productive potential of the economy as it would enable firms to produce more goods per worker. Hence unemployment could reduce without inflation as it would be accompanied with an increase in the productive potential of the economy and greater output. Also, if there is spare capacity in the economy due to under-utilisation of resources, the increased income due to lower unemployment would not lead to inflation as there would be room for better, more efficient utilisation of resources. Hence a rise in the price level can be avoided by greater productive potential. However, if the economy is operating close to full capacity, a reduction in unemployment could cause inflation if the rise in income and the money supply rise is greater than the increase in productive potential, Government spending to reduce unemployment might cause a much greater rise in total demand. This could lead to demand-pull inflation. It may also lead to cost-push inflation if the unemployment rate is so low firms have to compete for workers leading to a wage- price spiral. Workers tend to take up a greater proportion of costs of firms. Hence scarcity of workers could cause the costs of firms to greatly increase and so the total supply would reduce leading to cost-push inflation. Level Description Marks 1 There is a simple attempt at using economic definitions and terminology. Some reference may be made to economic theory, with occasional understanding. 1–2 0 A mark of zero should be awarded for no creditable content. 0 Question Answer Marks Guidance 2(d) Example of an L2 answer Yes, the government can reduce unemployment without increasing inflation by using supply-side policy measure. This includes providing education and training to workers. Due to this the efficiency of workers who will be able to produce better quality goods in large amount reducing the average costs to the firm. This will also help in reducing the selling price or keeping it the same which might not cause inflation. Although if using measures like expansionary fiscal or monetary policy will raise the demand for workers, offering them higher wages could add to firms’ average cost hence selling price might increase, causing inflation. Also, by using supply-side policy measure the improved skills and productivity will want them to charge higher wages to hire them. This will increase the average cost and the selling price of the firm, causing inflation. Example of an L1 answer Yes government can reduce unemployment without increasing inflation by attracting more MNCs. By keeping policies such as this, the amount of people you have to employ is increased. By providing subsidy of jobs, providing financial help to firms which are in a loss so that they can reduce the chances of increasing the rate of inflation when employing more workers.

This question in 0455/22 Feb/March 2021

1 (a) Calculate, in $s, the contribution of the fishing industry to Morocco’s GDP in 2017. [1] (b) Identify two macroeconomic aims, other than balance of payments stability, that the Moroccan government could achieve through the blue economy. [2] (c) Explain why an increase in the global demand for fish could reduce a deficit in Morocco’s current account of its balance of payment. [2] (d) Explain two causes of poverty amongst fishermen. [4] (e) Analyse whether GDP per head always increases when the percentage (%) contribution of the primary sector increases. [4] (f) Analyse how regulation of fishing could ensure economic growth is sustained for future generations. [5] (g) Discuss whether or not subsidies to fishermen could help the Moroccan economy. [6] (h) Discuss whether or not a reduction in trade protection by other African countries would be beneficial for Morocco. [6]

30 marks

Mark scheme: 1(a) Calculate, in $s, the contribution of the fishing industry to Morocco’s GDP in 2017. $2.18 billion / $2 180 000 000 1 Accept 2.2 bn. $ sign not essential. 1(b) Identify two macroeconomic aims, other than balance of payments stability, that the Moroccan government could achieve through the Blue Economy. • Economic growth/sustainable economic growth/development/output • Create employment/ lower unemployment/ full employment • Reduce poverty • Improve livelihoods / improve living standards / improve quality of life 2 1(c) Explain why an increase in the global demand for fish could reduce a deficit in Morocco’s current account of its balance of payment. Logical explanation which might include: Increase in global demand could lead to an increase in demand for Moroccan fish / more sales of Moroccan fish / increase supply of Moroccan fish (1) increasing exports (1) creating an inflow of money / raising export revenue (1) improve trade in goods balance/trade balance (1) balance out imports / exports may now equal imports / reduce gap between exports and imports (1). 2 Question Answer Mark Guidance 1(d) Explain two causes of poverty amongst fishermen. Logical explanation which might include: Low wages (1) cannot afford necessities (1) such as food and proper housing (1) high supply / low demand for fishermen (1). Structural unemployment (1) fishermen might not have the skills to take up other jobs (1) after the decline in the fishing industry in their area (1). Seasonal unemployment (1) may not be possible to catch fish throughout the year (1) instability of income (1). 4 One mark for each cause identified and one mark for each explanation. One mark for unemployment. Question Answer Mark Guidance 1(e) Analyse whether GDP per head always increases when the percentage (%) contribution of the primary sector increases. Coherent analysis which might include: Overview No / not always (1) if % contribution of the primary sector increases, GDP per head is lower (1). Supporting evidence e.g. Pakistan/India/Morocco have a high % contribution and low GDP per head (1), Germany has the lowest % contribution but second highest GDP per head (1) comparison e.g. Germany has a higher GDP per head than India but a smaller contribution from the primary sector (1). Exception There is an exception/on the other hand (1) e.g. Australia – higher % contribution than Germany, but higher GDP per head or e.g. Malaysia – higher % contribution than Bulgaria, but higher GDP (1). Comments High-income countries tend to have more resources concentrated in the secondary and tertiary sectors/tertiary sector (1) incomes tend to be higher in the secondary and tertiary sectors / lower in the primary sector (1). 4 Question Answer Mark Guidance 1(f) Analyse how regulation of fishing could ensure economic growth is sustained for future generations. Coherent analysis which might include: Regulation could prevent people from overfishing (1) regulation is backed up by law / fines may be imposed (1) gives time for fish to breed / recover form overfishing (1) so that future generations will still have access to fish stock / maintain fish stocks (1) this means that future generations will still be able to generate revenue from fishing (1) which could lead to increased or sustained investment/consumption/exports (1) ensuring high total demand (1) Regulation on fishing could also help coastal tourism (1) protect the environment (1) increase revenue from tourism (1) as people visit areas of natural beauty (1). (5) Also allow an approach based on how overfishing may threaten sustainable economic growth. Question Answer Mark Guidance 1(g) Discuss whether or not subsidies to fishermen could help the Moroccan economy. Award up to 4 marks for logical reasons why it could, which might include: • subsidies will decrease cost of production (1) and enable Moroccan fishermen to use better technology / capital / / equipment / enable them to take advantage of economies of scale / engage in research & development (1) • increase their productivity (1) lead to an increase in supply / output (1) price of Moroccan fish would decrease (1) this will increase competitiveness of Moroccan fishermen (1) increase demand (1) create jobs / increase employment / reduce unemployment (1) increase exports / reduce imports (1) improve the current account balance (1). • increase revenues/income of fishermen (1) investments / consumption (1) increase total demand (1) leading to economic growth (1). Up to 4 marks how subsidies to fisherman could not help the Moroccan economy: • opportunity cost for the government (1) may result in a budget deficit (1) less spending on education / healthcare (1) decrease overall productivity of the economy (1) less economic growth (1). • subsidies may lead to complacency (1) may become depended on subsidies (1) fishermen may not use the subsidies efficiently (1) may result in overfishing (1) may increase pollution / external costs (1). • Fishing industry only contributes 2% of GDP (1) even if it expands may not increase the country’s output significantly (1). • Competitiveness may not increase (1) prices might not decrease (1) other governments may subsidise their fishermen (1). 6 Apply this example to all questions with the command word DISCUSS (1g, 1h, 2d, 3d, 4d and 5d) Each point may be credited only once, on either side of an argument, but separate development as to how/why the outcome may differ is rewarded. Generic example Mark Tax revenue may decrease 1 because of reason e.g. incomes may be lower. 1 Tax revenue may increase because incomes may be higher i.e. reverse of a previous argument. 0 Tax revenue may increase because of a different reason i.e. not the reverse of a previous argument e.g. government spending on subsidies may stimulate the economy more than spending on education. 1 Question Answer Mark Guidance 1(h) Discuss whether or not a reduction in trade protection by other African countries would be beneficial for Morocco. Award up to 4 marks for logical reasons why it might be beneficial, which might include: • less protectionism will decrease the price of Moroccan exports (1) increase exports (1) improve current account balance (1) • less protectionism will allow Morocco to specialise more / enable it to concentrate on what it is best at producing (1) • demand for labour is derived demand (1), demand for domestic workers will increase (1) therefore unemployment decreases (1) income increases / poverty decreases (1) consumption of good and services can increase (1) more total demand (1) economic growth (1) • inflation may fall (1) lower cost of imported raw materials/imported capital goods (1). Award up to 4 marks for logical reasons why it might not be beneficial, which might include: • decreased protection might lead to other countries products decreasing in price as well (1), Moroccan goods may decrease in competitiveness (1) decrease the demand for Moroccan goods (1) increase in imports (1) • infant/sunrise industries may go out of business (1) unable to compete as not able to take full advantage of economies of scale (1) • sunset/declining industries may go out of business (1) likely to have high costs of production (1) • decrease the demand for workers (1) as less is produced (1) unemployment increases (1) less income (1) consumption of goods and services decrease (1) decreased total demand (1) less economic growth (1). 6

This question in 0455/23 May/June 2021

2 Australia’s foreign exchange rate fluctuates. The value of Australia’s exports is regularly greater than the value of its imports. Australia is Papua New Guinea’s main trading partner. In 2019, the government of Papua New Guinea increased income tax to reduce its inflation rate. It used other policy measures to increase its economic growth rate. (a) Define foreign exchange rate. [2] (b) Explain two reasons why the value of a country’s exports may be greater than the value of its imports. [4] (c) Analyse how an increase in income tax can affect a country’s inflation rate. [6] (d) Discuss whether or not governments should aim for a high rate of economic growth. [8]

20 marks

Mark scheme: 2(a) Define foreign exchange rate. The price / value of a currency (1) in terms of another currency / currencies (1). 2 2(b) Explain two reasons why the value of a country’s exports may be greater than the value of its imports. Logical explanation which might include: Price of exports may be lower than price of other countries’ products (1) due to e.g., devaluation / depreciation / weaker currency / higher productivity / lower inflation (1). Quality of exports may be higher than the quality of other countries’ products (1) due to e.g., more investment / better education / specialisation (1). Incomes abroad may have increased (1) enabling foreigners to buy more of the country’s products (1). Protective measures (1) restrict imports / subsidise domestic firms or exports (1). May have high value exports e.g., oil (1) with high (global) demand (1). Recession / low demand at home (1) results in fewer imports / encourages firms to export (1). 4 One mark for each of two reasons identified and one mark for each explanation. Question Answer Marks Guidance 2(c) Analyse how an increase in income tax can affect a country’s inflation rate. One mark for a simple explanation that an increase in income tax can reduce the rate of inflation Coherent analysis which might include: An increase in income tax will reduce disposable income / purchasing power (1) this may reduce consumer spending (1) lower total demand (1) this may encourage firms to reduce prices / reduce price rises (1) lower demand-pull inflation (1). Increase in income tax may encourage workers to press for wage rises (1) increase costs of production (1) cause cost-push inflation (1). Income tax revenue can be used to provide e.g., subsidies to certain goods and services (1) reducing prices (1). 6 Question Answer Marks Guidance 2(d) Discuss whether or not governments should aim for a high rate of economic growth. In assessing each answer, use the table opposite. Why it should:  economic growth can raise incomes  higher incomes can raise living standards  economic growth can reduce unemployment  economic growth can increase tax revenue allowing the government to spend more on e.g., education. Why it should not:  may deplete non-renewable resources which can reduce future growth  may result in pollution  may put other demands on workers who may have to work long hours  may lead to a deficit on current account of the balance of payment  may result in greater inequality  risk of inflation 8 Level Description Marks 3 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 2 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 Question Answer Marks Guidance 2(d) Level Description Marks 1 There is a simple attempt at using economic definitions and terminology. Some reference may be made to economic theory, with occasional understanding. 12 0 A mark of zero should be awarded for no creditable content. 0

This question in 0455/21 May/June 2022

1 (a) Calculate Bhutan’s GDP in 2018. [1] (b) Identify two indicators that are in both the World Happiness Index and the Human Development Index. [2] (c) State why Bhutan’s 2018 government budget is likely to have increased total demand in Bhutan. [2] (d) Explain two reasons why someone may prefer to work in the tertiary sector rather than in the primary sector. [4] (e) Analyse how investment in capital goods and education can increase New Zealand’s productivity. [4] (f) Analyse the relationship between GDP per head and net migration. [5] (g) Discuss whether or not enterprise is likely to have increased in New Zealand after 2019. [6] (h) Discuss whether or not a cut in income tax rates will increase living standards. [6]

30 marks

Mark scheme: 1(a) Calculate Bhutan’s GDP in 2018. $2.6 bn / $2600 m / $2 600 000 000 / 2.6  10⁹ (1). 1(b) Identify two indicators that are in both the World Happiness Index and the Human Development Index. Life expectancy (1) GDP per head (1). 2 If more than two indicators are given, consider the first three. 1(c) State why Bhutan’s 2018 government budget is likely to have increased total demand in Bhutan. Government spending was greater than government revenue (1) there was a budget deficit (1) of $70 m (1) the government may have used expansionary fiscal policy (1). 2 1(d) Explain two reasons why someone may prefer to work in the tertiary sector rather than in the primary sector. Logical explanation which might include: Better working conditions / non-wage factors (1) e.g. working inside / not having to work in wet weather / less stress / more job satisfaction / fringe benefits (1). Shorter working hours (1) permitting more leisure time (1). Type of work / less physically demanding / not manual work (1) less risk to health / less tiring / less dangerous / fewer accidents / may lack physical strength (1). Better paid (1) enabling more goods and services to be purchased / higher standard of living / as may require more qualifications / skills/training / value added may greater in the tertiary sector / tertiary sector may be expanding / primary sector contracting / may be higher demand for tertiary workers (1). 4 One mark for each of two reasons identified and one mark for each explanation. Note there is a degree of ‘mix and match’ here. For example, working hours or manual work can be taken as a development of working conditions. Accept an answer that explains the disadvantages of working in the primary sector e.g. may prefer to work in the tertiary sector as working hours are longer in the primary sector. Question Answer Marks Guidance 1(e) Analyse how investment in capital goods and education can increase New Zealand’s productivity. Coherent analysis which might include: Higher investment in capital goods will enable workers to work with better equipment (1) more output per worker / worker hour (1). New capital goods may incorporate advances in technology / be of higher quality (1) result in innovation (1) can work for long hours (1). Higher investment in education can enable more children to be educated / children to be educated for longer / improve quality of education / increase knowledge (1) increase workers’ skills / qualifications (1) enable workers to use more advanced technology (1). Investment in capital goods and/or education can enable capital goods/ workers to work at a faster rate (1) be more efficient (1) make fewer mistakes / less wastage (1). 4 Up to 3 marks for analysis on investment in capital goods and up to 3 marks for investment in education. Note only credit increase efficiency once. Question Answer Marks Guidance 1(f) Analyse the relationship between GDP per head and net migration. Coherent analysis which might include: Overview Generally, the countries with higher GDP per head have net immigration / net migration / the countries with lower GDP per head tend to have net emigration / positive/direct relationship (1). Supporting evidence Up to 2 marks for two pieces of supporting evidence e.g.  New Zealand has the highest GDP per head and the highest net immigration / net migration / highest positive migration (1)  Cyprus has the second highest GDP per head and the second highest net immigration / net migration / positive migration (1)  the four countries with the highest GDP per head, all have net immigration / positive net migration (1)  the two countries with lowest GDP per head both have net emigration / negative net migration (1) Exception Exception is Kenya or Mozambique (1) Kenya has higher GDP per head but higher net emigration than Mozambique (1). Comments Higher GDP per head may encourage people to move to the country to increase their living standards / income / people who migrate into the country may be high skilled / lower GDP per head may encourage people to emigrate to increase their living standards/income (1) other influences e.g. immigration controls / size of population / wars / political instability (1). 5 There may be an implied comparison e.g. generally countries with a high GDP per head have net immigration. New Zealand has a GDP per head of approx. $55 000 and net immigration of about 40,00 whereas Kenya has a GDP per head of $2,000 and net emigration of about 50 000 (1 mark). For explanation of exception, do not accept that Kenya has ‘lower net migration’ / Mozambique has ‘higher net migration’ – a misinterpretation of the figure. Question Answer Marks Guidance 1(g) Discuss whether or not enterprise is likely to have increased in New Zealand after 2019. Award up to 4 marks for logical reasons why it might, which may include: High labour productivity / high-skilled workers (1) may keep costs down (1) and increase profits (1) which will motivate more people to be entrepreneurs (1). Higher investment / better quality capital goods (1) may increase the number of firms / result in expansion of firms (1) and the opportunities to become entrepreneurs (1). Investment in education / better quality education (1) may increase the people with the skills to become entrepreneurs / increase risk taking ability (1). Higher government spending on mental health / child poverty / pollution (1) may increase workers’ skills / increase workers’ health / increase workers’ productivity (1) higher government subsidies (1) reduce firms’ costs of production (1) higher government spending may increase total demand (1). Higher economic growth (1) may have created more opportunities / greater confidence / higher total demand (1). Net immigration may have continued (1) and some immigrants may have been entrepreneurs / may set up new firms (1) more people in the country may raise total demand (1). Cut in income tax rates (1) could increase demand (1) firms’ revenue / profits (1) create greater profit incentive (1). 6 Apply this example to all questions with the command word DISCUSS (1g, 1h, 2d, 3d, 4d and 5d) Each point may be credited only once, on either side of an argument, but separate development as to how/why the outcome may differ is rewarded. Generic example Mark Tax revenue may decrease… 1 ...because of reason e.g., incomes may be lower. 1 Tax revenue may increase because incomes may be higher i.e., reverse of a previous argument. 0 Tax revenue may increase because of a different reason i.e., not the reverse of a previous argument e.g. government spending on subsidies may stimulate the economy more than spending on education. 1 Question Answer Marks Guidance 1(g) Award up to 4 marks for logical reasons why it might not, which may include: Uncertainty / lack of confidence (1) reason e.g. there may have been a recession / negative economic growth / unclear what may happen to GDP (1) which could have resulted in the reward to enterprise declining (1) may think there is a greater risk of running / setting up a firm (1). Corporation tax may have increased / tax may have increased (1) which would reduce retained profits / amount of profit that can be kept (1). Government attempts to reduce pollution / poverty / improve mental health (1) may increase firms’ costs of production and reduce profits (1) may have an opportunity cost (1) less spending on something that could increase enterprise (1) e.g. reduction is spending on education (1). Accept tax revenue may have increased for tax may have increased for why it might not Reward recognition that tax revenue may rise without a rise in tax rates or with a fall in tax rates. Question Answer Marks Guidance 1(h) Discuss whether or not a cut in income tax rates will increase living standards. Award up to 4 marks for logical reasons why it might, which may include: Will increase disposable income (1) increase ability to buy goods and services / increase purchasing power (1) buy basic necessities / reduce absolute poverty (1) may be able to fulfil more wants / buy more luxuries (1). May increase spending (1) increase total demand (1) reduce unemployment / increase employment (1) increase output / increase economic growth (1). May increase saving (1) and so provide a safety net (1). May encourage investment (1) which may lower costs of production (1) reduce prices (1). May be able to buy more merit goods / better quality education/healthcare (1) increase health / life expectancy (1). May increase the incentive to work (1) may earn more in work than on unemployment benefits (1). May enable people to work fewer hours (1) enjoy more leisure time (1). 6 Rise in income is not sufficient – need idea of disposable income. Question Answer Marks Guidance 1(h) Award up to 4 marks for logical reasons why it might not, which may include: Tax revenue may fall (1) may result in a cut in government spending (1) on e.g. education / health care / mental healthcare / child poverty / pollution / unemployment benefit (1) poor may be most reliant on public services (1). It may increase congestion as people buy more cars (1) may lead to pollution (1). It may increase depletion of non-renewable resources as consumption increases (1). It may benefit mostly the rich / poor may not benefit / will not benefit the unemployed (1) and so not everyone may enjoy higher living standards (1). People may spend on demerit goods (1) higher spending which could reduce health / life expectancy (1). Higher spending / demand may increase prices / cause inflation (1) leave purchasing power unchanged / reduce purchasing power (1).

This question in 0455/22 May/June 2022

4 In 1982, Nauru had the world’s highest GDP per head. It had a large primary sector and exported phosphate, a natural fertiliser. However, this natural resource did not last long. Nauru is now facing market failure due to pollution and unhealthy food imports. Despite having more imports of goods than exports of goods, it still records a surplus on the current account of its balance of payments. (a) Define GDP per head. [2] (b) Explain how a country with more imports of goods than exports of goods can still record a surplus on the current account of its balance of payments. [4] (c) Analyse the causes of market failure. [6] (d) Discuss whether or not having a large primary sector is a disadvantage to an economy. [8]

20 marks

Mark scheme: 4(a) Define GDP per head. Total output / income / expenditure (1) divided by population / per person (1). GDP per head = Total GDP / Population 4(b) Explain how a country with more imports of goods than exports of goods can still record a surplus on the current account of its balance of payments. Logical explanation which might include: Export prices may be high (1) import prices may be low (1) export revenue may exceed import expenditure (1). Current account consists of trade in goods, trade in services, primary income, and secondary income (1). Therefore, even if there are more imports of goods than exports of goods, which creates a trade of goods deficit (1) if the other three components have a surplus (1) then the overall current account will have a surplus (1). This is likely to be the case if there is a high level of income from investments abroad (1) exports of services (1) a lot of transfer payments (1) such as inflow of aid to a country (1) incomes of nationals working abroad / remittances (1). 4 Question Answer Marks Guidance 4(c) Analyse the causes of market failure. Coherent analysis which might include: Market failure is when market forces cause an inefficient allocation of resources (1). Demerit goods (1) example (1) imperfect information (1) where consumers may not know about the actual costs (1). Merit goods (1) example (1) consumers may not know about actual benefits (1). External costs (1) costs to the third party (1) not considered by consumers and producers (1) therefore goods are overproduced or overconsumed (1). External benefits (1) benefits to the third party (1) not considered by consumers and producers (1) goods are underproduced and under- consumed (1). Public goods (1) non-rivalry (1) and non-excludable (1) free rider problem (1) people want to consume but don’t want to pay for it (1) no profit incentive for firms (1) goods are underprovided by the market (1). Abuse of monopoly power (1) when firms have no competitors (1) they will push up prices (1) or reduce quality (1). Factor immobility (1) where labour cannot move from one job to another (1) or to take up a job somewhere else (1) leads to structural unemployment (1) 6 Question Answer Marks Guidance 4(d) Discuss, whether or not, having a large primary sector is a disadvantage to an economy. In assessing each answer, use the table opposite. Why primary sector is a disadvantage:  lack of value added – low price, low income – low standards of living  unstable prices – unstable income  low productivity – low income  high tariffs – difficult to export  specialisation in any one sector is risky  unsustainable – natural resources could be exhausted Why primary sector is an advantage:  provides employment, especially low skilled in developing countries  provides employment, e.g. high skilled in Saudi Arabian oil  produces high value added exports, e.g. gold in S. Africa  produces exports with inelastic demand, e.g. oil  low start-up costs, low barriers to entry, e.g. farming  may be better than other countries at producing primary products  may be able to diversify with money earned from primary sector  could reduce inequality between urban and rural areas 8 Level Description Marks 3 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 Question Answer Marks Guidance 4(d) Level Description Marks 2 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 1 There is a simple attempt at using economic definitions and terminology. Some reference may be made to economic theory, with occasional understanding. 1–2 0 A mark of zero should be awarded for no creditable content. 0

This question in 0455/23 May/June 2022

5 Bulgaria is part of the European Union (EU), but it has much lower corporation tax rates than other EU members. However, regulation by the Bulgarian government has discouraged foreign investment into Bulgaria. In addition, Bulgaria’s economic growth rate has decreased in recent years, due in part to a steady fall in its quantity of labour. (a) Define regulation. [2] (b) Explain two causes of a fall in the quantity of labour in a country. [4] (c) Analyse how differences in the rates of corporation tax between countries may affect multinational companies (MNCs). [6] (d) Discuss whether or not a decrease in a country’s economic growth rate will harm its economy. [8]

20 marks

Mark scheme: 5(a) Define regulation. 2 Award 1 mark for any relevant examples e.g. a set of rules or laws (1) normally imposed by government / form of No smoking for under 16s, not allowed to government intervention (1) to affect behaviour of various economic actors leave home, no chewing gum, prohibition of in the economy (1). alcohol sales, compulsory face masks. 5(b) Explain two causes of a fall in the quantity of labour in a country. 4 Logical explanation which might include: • Negative net migration (1) emigration rates higher than immigration rates (1) as people search for better job opportunities / higher wages / higher living standards elsewhere (1). • High death rates (1) the ratio of deaths to the population (per thousand people per year) increases (1) due to poor healthcare facilities / lack of medicines / diseases (1). • Ageing population (1) average population getting older (1) lots of retirees / pensioners (1) no longer contributing to the labour force (1). 5(c) Analyse how differences in the rates of corporation tax between 6 countries may affect multinational companies (MNCs). Coherent analysis which might include: Lower corporation tax in one country will attract more MNCs into the country (1) this is because their potential after tax profits will increase (1). Lower corporation tax will attract more MNCs to reinvest in the economy (1) this is because they will be able to get more profits and thus more capital for reinvestments (1) this could to an increase in investment in capital which leads to increased productivity (1) and increased output of MNCs (1). Lower corporation tax will enable more firms to expand their operations (1) and therefore hire more workers (1). 5(d) Discuss whether or not a decrease in a country’s economic growth 8 Level Description Marks rate will harm its economy. 3 A reasoned 6–8 In assessing each answer, use the table opposite. discussion which Why a decrease in economic growth rate will harm an economy: accurately examines • Less job creation – higher unemployment both sides of the • Reduction in consumer confidence in the economy economic argument, • Reduction in investor confidence in the economy making use of • Lower tax revenues – less spending on development economic • Reduction in level of increase in living standards. information and clear and logical Why a decrease in economic growth rate will not harm an economy: analysis to evaluate • Reduce inflation economic issues • Less harm to the environment and situations. One • Might reduce level of imports – less deficit in the current account of the side of the argument balance of payments may have more • Less stress – lower working hours. 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. 5(d) Level Description Marks 2 A reasoned 3–5 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. 1 There is a simple 1–2 attempt at using economic definitions and terminology. Some reference may be made to economic theory, with occasional understanding. 0 A mark of zero 0 should be awarded for no creditable content.

This question in 0455/21 Oct/Nov 2022

4 Advances in technology have changed how trees (wood) are cut down, transported and used in the manufacture of furniture, such as tables. Wood is in inelastic supply. Wood can be supplied in all economic systems. However, public goods are not supplied in a market economic system. (a) Define inelastic supply. [2] (b) Explain why public goods would not be supplied in a market economic system. [4] (c) Analyse, using a demand and supply diagram, the effect on the market for furniture of an increase in the price of wood. [6] (d) Discuss whether or not advances in technology will benefit a country’s population. [8]

20 marks

Mark scheme: 4(a) Define inelastic supply. 2 Allow one mark for PES = 0. Quantity supplied / supply changes by a smaller percentage change than price (2). Supply changing by less than price / PES less than 1 / PES < 1 / supply unresponsive to change in price (1). 4(b) Explain why public goods would not be supplied in a 4 No marks for examples. market economic system. Logical explanation which might include: Public goods are non-excludable (1) it is not possible to stop people who are not prepared to pay for them, from consuming them (1) free rider problem (1). Public goods are non-rival (1) if supplied for one, supplied for everyone and so cannot charge additional consumers (1). Private sector firms are profit motivated (1) they will not produce products if they cannot get revenue from them (1) would make a loss (1). 4(c) Analyse, using a demand and supply diagram, the 6 effect on the market for furniture of an increase in the price of wood. Coherent analysis which might include: Up to 4 marks for the diagram: D&S diagram: Axes correctly labelled – price and quantity or p and q (1). Original demand and supply curves correctly labelled (1). New supply curve shifted to the left (1). Equilibriums – shown by lines P1 and Q1 and P2 and Q2 or equilibrium points E1 and E2 (1). Up to 2 marks for coherent analysis which might include: Would increase costs of production (1) raise price / reduce Accept increase in price or fall in quantity on their own but quantity (traded) (1). not an increase in price of wood or fall in quantity of wood. 4(d) Discuss whether or not advances in technology will 8 Level Description Marks benefit a country’s population. 3 A reasoned discussion which 6–8 In assessing each answer, use the table opposite. accurately examines both sides of the economic argument, making use of Why it might: economic information and clear and • may reduce costs of production logical analysis to evaluate economic • may increase significance of technical economies of issues and situations. One side of the argument may have more depth than scale the other, but overall both sided of the • may lower prices argument are considered and • may make the country’s firms more internationally developed. There is thoughtful competitive evaluation of economic concepts, • may promote globalisation terminology, information and/or data • may encourage firms to expand and take on more appropriate to the question. The workers discussion may also point out the • economic growth may increase incomes possible uncertainties of alternative • may increase quality – less subject to human error decisions and outcomes. • may create new products • may improve working conditions 2 A reasoned discussion which makes 3–5 • may extend education through online learning. use of economic information and clear analysis to evaluate economic issues and situations. The answer may lack Why it might not: some depth and development may be • may increase unemployment one-sided. There is relevant use of • may make products more standardised / not produced economic concepts, terminology, to individual needs information and data appropriate to • may increase stress the question. • may be over dependence on technology which can fail • may increase fraud 1 There is a simple attempt at using 1–2 • may cause negative externalities e.g. fracking. economic definitions and terminology. Some reference may be made to economic theory, with occasional understanding. 0 A mark of zero should be awarded for 0 no creditable content.

This question in 0455/22 Oct/Nov 2022

1 (a) Calculate the price elasticity of supply of Ecuador’s oil. [1] (b) Identify two key resource allocation questions. [2] (c) State why sunshine has no opportunity cost. [2] (d) Explain two reasons why Ecuador experienced a recession between 2014 and 2016. [4] (e) Analyse how building more roads can increase a country’s economic growth rate. [4] (f) Analyse the relationship between GDP per head and car ownership. [5] (g) Discuss whether or not the profits of Ecuador’s textile firms are likely to have increased between 2016 and 2019. [6] (h) Discuss whether or not Ecuador benefits from the emigration of some of its workers. [6]

30 marks

Mark scheme: Question Answer Marks Guidance 1(a) Calculate the price elasticity of supply of Ecuador’s oil. 1 Do not accept 16% 0.16 (1). 1(b) Identify two key resource allocation questions. 2 Do not accept: How much to produce or for whom to produce What to produce / produce less of one product and more of another product / less oil and more textiles (1). How to produce it / how products are made / using fewer capital goods (1). 1(c) State why sunshine has no opportunity cost. 2 It is a free good (1). In unlimited supply / not scarce / a renewable source of energy (1). Does not take resources to produce it / nothing needs to be sacrificed to use it / no alternative / substitute so no opportunity cost (1). It is there naturally (1). 1(d) Explain two reasons why Ecuador experienced a 4 One mark for each of two reasons identified and one mark recession between 2014 and 2016. for each explanation. Logical explanation which might include: Fall in demand for exports [of oil] (1) lower export revenue / increase current account deficit / lower output of oil / lower total demand / lower GDP (1). Decrease in government spending (1) lower employment / lower output / lower income from benefits / lower total demand / lower GDP (1). 1(e) Analyse how building more roads can increase a 4 country’s economic growth rate. Building more roads would increase employment )1) lower unemployment (1) increase demand for road building materials (1) increase in government spending on roads (1) increase incomes (1) leading to higher demand / expenditure on goods and services e.g. education / cars (1). Less congestion (1) easier to transport goods / better infrastructure (1) quicker to work / increases labour mobility / longer working hours / more productive / efficient workforce (1) output rises (1). Lower transport costs (1) encourage firms to increase output / attract MNCs / foreign investment (1). Lower costs may increase international competitiveness (1) increase demand for country’s exports (1). 1(f) Analyse the relationship between GDP per head and car 5 There must be a comparison between countries and/or GDP ownership. per head and car ownership. Merely describing the data gets no marks as it is not analysis. Coherent analysis which might include: A direct comparison between two countries e.g. GDP per Overview head is higher in Switzerland than Senegal and car Generally, a direct relationship / the higher the income, the ownership is higher in Switzerland than Senegal is worth the higher the car ownership / the lower the income, the lower 2 marks. the car ownership (1). Supporting evidence – two comparison examples Senegal has the lowest GDP per head and the lowest car ownership (1). Ecuador has the second lowest GDP per head and the second lowest car ownership / Spain has higher GDP per head and car ownership than Uruguay (1) Exception New Zealand / Switzerland (1) Switzerland has a higher GDP per head but lower car ownership than New Zealand (1). OR Switzerland has highest GDP per head but only second highest car ownership (1) OR New Zealand has second highest GDP per head but highest car ownership (1). Comments Higher income would increase ability to purchase cars / high income countries often have more than one car per household (1) For exception other influences on demand e.g. cost of public transport / road space / congestions (1). 1(g) Discuss whether or not the profits of Ecuador’s textile 6 Apply this example to all questions with the command firms are likely to have increased between 2016 and word DISCUSS 2019. (1g, 1h, 2d, 3d, 4d and 5d) Award up to 4 marks for logical reasons why they Each point may be credited only once, on either side of an might, which may include: argument, but separate development as to how/why the Incomes / household spending increased in Ecuador (1) outcome may differ is rewarded. increasing demand for textiles (1) revenue increases (1). Generic example Mark Costs of production may have fallen (1) due to lower transport costs (1)’. Tax revenue may decrease… 1 Increase in scale of production (1) increased ability to take ...because of reason e.g. incomes may be lower. 1 advantage of economies of scale (1) average cost falls (1) profits may rise if prices unchanged but costs fall / profit is Tax revenue may increase because incomes 0 revenue – costs (1). may be higher i.e. reverse of a previous argument. Low increase in wage costs (1) revenue may have increased by more than costs (1). Tax revenue may increase because of a 1 different reason i.e. not the reverse of a previous Incomes abroad may have increased (1) increasing demand argument e.g. government spending on for Ecuadorean textiles (1) especially of luxury textiles (1). subsidies may stimulate the economy more than spending on education. Award up to 4 marks for logical reasons why they might not, which may include: The firms may have lost skilled workers abroad (1) which could have reduced productivity (1) increased costs / production falls (1). Strong competition from abroad (1) they may have lost sales to competitors (1) reducing revenue and or prices (1). Low wage increase (1) workers may leave industry / lower productivity (1) trade unions / workers may take action (1) may strike / disrupting the firms’ supply/ lead to higher costs (1). 1(h) Discuss whether or not Ecuador benefits from the 6 emigration of some of its workers. Award up to 4 marks for logical reasons why it might, which may include: Some may be unskilled (1), may have been unemployed (1) others leaving jobs create vacancies to be filled by unemployed (1) and so the government would spend less on unemployment benefit / more for other public spending (1) less poverty as a result (1). Some may be trained abroad (1) and may bring back skills and ideas into the country (1) increasing output (1). Some may send money home (1) improve the current account balance (1) will increase spending / total demand (1) leading to economic growth (1). Net emigration results in lower population / reduces overpopulation (1) less depletion of resources / pollution / shortage of resources e.g. housing (1). Award up to 4 marks for logical reasons why it might not, which may include: May lose skilled workers (1) lower productivity (1) low quality products / reduce output / economic growth (1) a relatively high proportion of people lost (1) makes it more difficult to attract MNCs (1). If some will not support families at home (1) dependency ratio will rise (1) place more burden on the government (1). Large proportion / 3 million already working abroad (1) shortage of workers / large reduction in size of labour force / increase (unit) wage costs (1) less income (1) less government tax revenue (1) less government spending e.g. education, health (1). Younger workers emigrating (1) leads to an ageing population (1).

This question in 0455/23 Oct/Nov 2022

5 Palau is a small island country in the Pacific Ocean. It has received considerable financial support from the US. Living standards are thought to be lower in Palau than in the US. Palau imposes some of the highest tariffs in the world. These trade tariffs affect Palau’s current account of its balance of payments. In 2019, commercial bank lending to firms and households in Palau increased. (a) Identify two components of the current account of the balance of payments. [2] (b) Explain two reasons for differences in living standards between countries. [4] (c) Analyse the reasons why a country may impose tariffs on imports. [6] (d) Discuss whether or not an increase in commercial bank lending will increase economic growth. [8]

20 marks

Mark scheme: 5(a) Identify two components of the current account of the 2 Also accept visible balance, invisible balance, income and balance of payments. current transfers. Trade in goods (1) In addition, accept exports and imports. Trade in services (1) Primary income (1) Secondary income (1). 5(b) Explain two reasons for differences in living standards 4 One mark for each of two reasons identified and one mark between countries. for each explanation. Logical explanation which might include difference in: Rate of employment /level of income (GDP per head) (i) will influence the ability to buy goods and services (1). Productivity (1) resulting in differences in ability to enjoy a different quantity of goods and services (1). Availability of resources / factors of production (1) resulting in differences in productive capacity (1). Level of technology (1) resulting higher quality of goods and services / better sanitation / clean water (1). Healthcare (1) resulting in differences in life expectancy (1). Education (1) causing differences in skills / job outcomes (1). International trade (1) resulting in differences in GDP per head (1). Cost of living (1) affecting ability to buy goods and services (1). Environment (1) level of pollution / density of housing (1). War/conflict (1) causing reduced welfare / opportunity / diverted resources (1). 5(c) Analyse the reasons why a country may impose tariffs 6 on imports. Coherent analysis which might include: To increase the price of imports (1) may reduce demand for imports (1) reduce import expenditure (1) improve the current account position / balance of payments (1) increase demand for domestic firms (1) reduce unemployment (1) increase economic growth (1). To protect infant industries (1) enabling them to take advantage of economies of scale / stop them from being driven out by foreign firms with much lower costs due to size (1). To protect declining industries (1) prevent unemployment rising (1). To protect strategic industries (1) ensure self-sufficiency (1). To discourage demerit goods (1) to improve health / welfare of consumers (1). To stop dumping of overseas goods (1) where goods sold at below cost price / aimed at driving out domestic firms (1). As a source of government revenue (1) e.g. to use to subsidise domestic producers (1). As a countermeasure / retaliation (1) in response to unilateral imposition of tariffs by another country (1). 5(d) Discuss whether or not an increase in commercial bank 8 Level Description Marks lending will increase economic growth. 3 A reasoned discussion which 6–8 In assessing each answer, use the table opposite. accurately examines both sides of the economic argument, making use of Why it might: economic information and clear and • households may spend more on goods and services logical analysis to evaluate economic • higher total demand may increase output issues and situations. One side of the argument may have more depth than • firms may invest more leading to higher employment the other, but overall both sided of the • higher investment will increase total demand and argument are considered and productive capacity. developed. There is thoughtful evaluation of economic concepts, Why it might not: terminology, information and/or data • economy may already be at full employment appropriate to the question. The • higher total demand may increase prices / rate of discussion may also point out the inflation rather than output possible uncertainties of alternative • households and firms may spend on imports decisions and outcomes. • households and firms may borrow to repay past debts • variable interest rate increase could then affect level of 2 A reasoned discussion which makes 3–5 future consumption and investment 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. 1 There is a simple attempt at using 1–2 economic definitions and terminology. Some reference may be made to economic theory, with occasional understanding. 0 A mark of zero should be awarded for 0 no creditable content.

This question in 0455/23 Oct/Nov 2022

1 (a) Calculate the value of US imports from China in 2020. [1] (b) Identify two causes of the increase in the quantity of US factors of production. [2] (c) Explain one way that import tariffs could improve the US economy. [2] (d) Explain two reasons why the US inflation rate fell in 2020. [4] (e) Draw a demand and supply diagram to show the effect of an increase in the price of a complement on the market for ice cream. [4] (f) Analyse the relationship between government spending and unemployment. [5] (g) Discuss whether or not a central bank should aim for a low inflation rate. [6] (h) Discuss whether or not economic growth benefits everyone in the US. [6]

30 marks

Mark scheme: Question Answer Marks Guidance 1(a) Calculate the value of US imports from China in 1 Accept the correct figure without the $ sign. 2020. 560 000 000 000. 5.6  10^11 $560bn (1). 1(b) Identify two causes of the increase in the quantity 2 If more than two causes given, consider the first three. of US factors of production. Accept increase in labour for increase in the labour force. Land reclamation (1) increase in the labour force (1). 1(c) Explain one way that import tariffs could improve 2 One mark for a way identified and one mark for an explanation. the US economy. If more than one way identified, consider the first two. Could improve the current account / trade in goods / To gain two marks, one mark must come from improving the trade in goods and services / balance of payments (1) current account, increase output or raise tax revenue. by reducing imports / making domestic goods more competitive with imports / raising the price of imports Could raise more revenue is not sufficient – need more tax (1) revenue or more government revenue / income. Could increase output / cause economic growth (1) by increasing demand for US goods / raise employment (1). Could raise tax revenue (1) allowing the government to spend more on (e.g. education) / improve the (government budget position) (1). 1(d) Explain two reasons why the US inflation rate fell 4 One mark each for each of two reasons identified and one mark in 2020. each for each of two explanations. Logical explanation which might include: If more than two reasons given, consider the first three. Fall in consumer expenditure (1) lower total demand / reduce demand-pull inflation (1). Reduction in bargaining power may also be linked to lower total Reduction in workers’ bargaining power (1) fall in demand. wage rises / wages / fall in rise in costs / fall in costs / reduce cost-push inflation (1). Higher unemployment (1) reduces confidence / lower total demand / fall in consumer spending (1). Fall in (real) GDP (1) lower incomes / purchasing power / lower total demand (1). Current account deficit (1) lower total demand / reduce demand-pull inflation (1). 1(e) Draw a demand and supply diagram to show the 4 effect of an increase in the price of a complement on the market for ice cream. Demand and supply diagram: Axes correctly labelled – price and quantity or p and q (1). Original demand and supply curves correctly labelled (1). Demand curve shifted to the left (1). Equilibriums – shown by lines P1 and Q1 and P2 and Q2 or equilibrium points marked as E1 and E2 (1). 1(f) Analyse the relationship between government 5 Alternatively, some candidates may argue that changes in spending and unemployment. unemployment, could lead to changes in government spending. Credit both responses. Coherent analysis which might include: Overview: Inverse relationship / negative relationship (1) generally, the higher government spending, the lower the unemployment rate (1). Supporting evidence: E.g. 2015 to 2019, government spending increased and unemployment fell / 2015 to 2017 government spending increased and unemployment fell (1) processing / interpreting of data e.g. between 2015 to 2019, government spending rose by $700bn and unemployment fell by 1.6% (points) (1). Analysis of the expected relationship: • higher government spending will increase total demand (encouraging firms to expand and employ more workers) (1) • higher government spending may be on e.g. education, training, infrastructure, subsidies which could increase workers’ chances of gaining jobs (1) • higher employment will provide more tax revenue for the government to spend / lower employment will reduce tax revenue for the government to spend (1). Exception: 2020 (1) both government spending and unemployment rose / government spending and unemployment both at their highest (1). 1(f) Analysis of the exception: • government spending on unemployment benefits may have increased / rise in government spending not enough to stop GDP / consumer expenditure falling / GDP fell / there may be a time delay before higher government spending reduces unemployment (1). 1(g) Discuss whether or not a central bank should aim 6 May approach the answer from the point of view of the for a low inflation rate. disadvantages of high inflation. 2nd side should examine either the possible negative effects of Award up to 4 marks for logical reasons why it should, what the central bank may do to reduce the inflation rate or the which may include: possible loss of any beneficial effects of high inflation. • can increase international price competitiveness (1) improve the current account balance / No marks for possible effects on the exchange rate. increase exports (1) increase employment / reduce unemployment (1) Apply this example to all questions with the • can create certainty (1) which may increase command word DISCUSS confidence (1) which may encourage investment / (1g, 1h, 2d, 3d, 4d and 5d) attract MNCs (1) which may increase output / result in economic growth (1) Each point may be credited only once, on either side of an • can prevent a random redistribution of income (1) argument, but separate development as to how / why the outcome e.g. protect savers (1) may differ is rewarded. • may protect purchasing power (1) by promoting price stability (1) Generic example Mark • maintain / increase living standards (1) if wages rise by more than the price level (1) Tax revenue may decrease… 1 • can avoid fiscal drag (1) prevent people being put in higher tax brackets (1) ...because of reason e.g. incomes may be lower. 1 • can reduce menu / shoe leather costs (1) reduce firms’ costs of production (1). Tax revenue may increase because incomes may be 0 higher i.e. reverse of a previous argument. Award up to 4 marks for logical reasons why it should not, which may include: Tax revenue may increase because of a different 1 • increases in the rate of interest (1) contractionary reason i.e. not the reverse of a previous argument e.g. government spending on subsidies may monetary policy (1) can reduce consumer stimulate the economy more than spending on expenditure / can reduce investment (1) can education. reduce total demand (1) 1(g) • lower total demand can increase unemployment (1) cyclical unemployment (1) reduce economic growth (1) • low inflation can turn into deflation (1) leading to a recession (1) • makes it harder to pay off debt (1) increasing the risk of firms going out of business / households getting into difficulties (1) • central bank may aim for economic growth / low unemployment (1) higher demand-pull inflation may provide more encouragement to firms to expand (1). 1(h) Discuss whether or not economic growth benefits 6 everyone in the US. Award up to 4 marks for logical reasons why it might, which may include: • economic growth increases output / GDP (1) increases income per head / higher incomes / higher wages (1) enables more purchasing power / people to enjoy more goods and services (1) • economic growth can increase employment (1) raise living standards (1) may reduce poverty (1) • economic growth can increase tax revenue (1) enabling the government to spend more on e.g. education and healthcare (1) • economic growth may introduce better working conditions (1). Award up to 4 marks for logical reasons why it might not, which may include: • there may be an increase in unemployment due to lack of skills / some industries declining / greater use of capital / capital-intensive production (1) structural unemployment may occur (1) • income is unevenly distributed (1) those on low incomes e.g. the sick may not benefit (1) • higher output may result in external costs (1) e.g. pollution (1) people living near factories may suffer (1) • higher output may be the result of more resources being devoted to capital goods (1) may take time for consumers to benefit from more consumer goods (1) 1(h) • higher output may reduce natural resources (1) reducing future generations’ ability to benefit from them / reduce sustainability (1) • higher output may be the result of workers working longer hours (1) in poor working conditions (1) • may cause inflation (1) adversely affecting the poor / savers (1).

This question in 0455/22 Feb/March 2023

4 Safiye Ali became the first female doctor in Turkey in 1923. By 2020, 40% of Turkish doctors were women. Over this period, labour productivity increased. Turkey also experienced advances in technology, a change in the current account balance on its balance of payments and a significant increase in the size of its population. (a) Identify two causes of an increase in labour productivity. [2] (b) Explain two reasons why someone may choose to become a doctor. [4] (c) Analyse how advances in technology may improve the current account balance on a country’s balance of payments. [6] (d) Discuss whether or not a country with a high population growth rate is likely to experience a high economic growth rate. [8]

20 marks

Mark scheme: 4(a) Identify two causes of an increase in labour 2 Nothing for more motivated – TV. productivity. Two from: • improved education • improved training / higher skills • improved healthcare • higher pay / bonuses / lower income tax • better quality capital equipment / advances in technology • shorter working hours / longer holidays • better working conditions / better (fringe) benefits • increased experience • higher unemployment • specialisation 4(b) Explain two reasons why someone may choose to 4 One mark each for each of two reasons identified and one mark become a doctor. each for each of two explanations. Logical explanation which might include: If more than two reasons given, consider the first three. High pay (1) resulting in high living standards / caused by low supply / high demand / high number of job vacancies / strong bargaining power / high qualifications / high skills (1). Vocation (1) wanting to help people (1). Interest / job satisfaction (1) enjoying the challenges involved (1). Status (1) doctors are highly regarded (1). Family tradition (1) parents may have been doctors (1). High pensions (1) enabling high living standards during retirement (1). May be good working conditions (1) working inside (1). Job security (1) difficult to replace / essential service (1). (Fringe / non-wage) benefits (1) e.g. pension schemes (1). 4(c) Analyse how advances in technology may 6 Reward but do not expect reference to gaining a comparative improve the current account balance on a advantage. country’s balance of payments. Coherent analysis which might include: Raise productivity / increase efficiency / increase speed of production / increase output (1) reduce costs of production (1) lower prices (1) raise quality (1) create new products (1) increase international competitiveness (1) increase exports (1) reduce imports (1) increase export revenue (1) reduce import expenditure (1) improve trade in goods (and services) balance / reduce a current account deficit / create a surplus / increase a surplus (1). Increase access to information about goods and services (1) promote sales (1). Increase foreign tourism (1) easier to book foreign holidays (1) increase speed of transport (1). Make it easier to keep in contact with branches abroad (1) encourage setting up branches in other countries (1) receive profits from other countries (1) increase primary income (1). 4(d) Discuss whether or not a country with a high 8 Level Description Marks population growth rate is likely to experience a high economic growth rate. 3 A reasoned discussion which accurately 6–8 examines both sides of the economic In assessing each answer, use the table opposite. argument, making use of economic information and clear and logical analysis Why it might: to evaluate economic issues and • may have an increasing labour force, capable of situations. One side of the argument may producing a higher output have more depth than the other, but • likely to have higher demand, encouraging higher overall, both sides of the argument are output considered and developed. There is • larger markets can enable greater advantage to thoughtful evaluation of economic be taken of economies of scale concepts, terminology, information and / • may have higher tax revenue, enabling the or data appropriate to the question. The government to spend more on e.g. education discussion may also point out the which can promote economic growth possible uncertainties of alternative decisions and outcomes. Why it might not: 2 A reasoned discussion which makes use 3–5 • may have an increase in the number of of economic information and clear dependents, reducing resources which can be analysis to evaluate economic issues devoted to increasing productive capacity and situations. The answer may lack • rise in birth rate may reduce the size of the labour some depth and development may be force as people leave the labour force to bring up one-sided. There is relevant use of children economic concepts, terminology, • resources may be depleted, reducing productive information and data appropriate to the capacity question. • external costs e.g. congestion and pollution may increase which may reduce productivity. 1 There is a simple attempt at using 1–2 economic definitions and terminology. Some reference may be made to economic theory, with occasional understanding. 0 A mark of zero should be awarded for no 0 creditable content.

This question in 0455/22 Feb/March 2023

1 (a) Calculate Australia’s unemployment rate in 2021. [1] (b) Identify two substitutes for coal. [2] (c) Explain one economy of scale that could benefit a coal-mining firm. [2] (d) Explain two influences on the price elasticity of supply of coal. [4] (e) Draw a demand and supply diagram to show how setting a maximum price below the equilibrium price will affect a market. [4] (f) Analyse whether large coal-producing countries are likely to be net exporters of coal. [5] (g) Discuss whether or not an increase in the size of its coal industry will benefit the Australian economy. [6] (h) Discuss whether or not Australia is likely to have a budget deficit in 2026. [6]

30 marks

Mark scheme: 1(a) Calculate Australia’s unemployment rate in 2021. 4% Allow 4 without percentage 1(b) Identify two substitutes for coal. Two from:  gas  offshore wind / wind power  solar power / panels 2 1(c) Explain one economy of scale that could benefit a coal- mining firm. Managerial / labour economy (1) employing specialist workers e.g. mining engineers (1). Technical economy (1) employing efficient / technologically advanced equipment e.g. drones (1). External economy of scale (1) example e.g. skilled labour force (1). 2 One mark for the economy of scale identified and one mark for an explanation. 1(d) Explain two influences on the price elasticity of supply of coal. Storage time (1) expensive to store so inelastic supply (1). Construction of new mine / production time (1) takes a long time, so inelastic supply (1). Stocks (1) may make supply elastic (1). 4 One mark each for each of two influences identified and one mark each for each of two explanations. Question Answer Marks Guidance 1(e) Draw a demand and supply diagram to show how setting a maximum price below the equilibrium price will affect a market. Demand and supply diagram: Axes correctly labelled – price and quantity or p and q (1). Demand and supply curves correctly labelled (1). Price line set below the equilibrium (1). Demand shown as greater than supply (1) e.g. has the two dotted lines downwards (it does not have to be labelled Qs and Qd). 4 Note: Accept unlabelled price line / line drawn only to demand curve. Accept shortage if correctly identified on the diagram. Do not accept demand greater than supply if demand and supply curves are incorrectly drawn Question Answer Marks Guidance 1(f) Analyse whether large coal-producing countries are likely to be net exporters of coal. Coherent analysis which might include: Expected outcome: Large coal producing countries may have a surplus to sell / may have grown their production in order to sell abroad (1) most of the evidence supports this relationship (1) Supporting evidence: Five of the seven countries consume less coal than they produce (1) calculation e.g. US could have exported 11 million tonnes / Australia could have exported 394 million tonnes or simply the difference (1). Analysis: Countries that produce more coal than they consume may benefit from economies of scale / can export because their prices are low (1). Exceptions: China or India are an exception (1) as they consumed more coal than they produced (1). Analysis: they may have been net importers (1) since had used up stocks of coal / need more energy as a developing country (1) may not be able to export coal if world demand for coal is low / countries may both import and export coal (1). 5 Responses do not have to be in the format suggested but they should address the expected / normal outcome, offer supporting evidence of that, highlight any exceptions to that, and analyse the overall data. Question Answer Marks Guidance 1(g) Discuss whether or not an increase in the size of its coal industry will benefit the Australian economy. Award up to 4 marks for logical reasons why it might, which may include:  may increase GDP / economic growth (1) increasing living standards / raise incomes / reduce poverty (1)  may reduce unemployment (1) structural unemployment (1)  may improve current account position / have a surplus (1) as Australia seems to be a net exporter of coal (1)  may increase tax revenue (1) increasing government’s ability to spend (1)  economies of scale (1) result in lower prices for households and industries (1). Award up to 4 marks for logical reasons why it might not, which may include:  may increase pollution (1) lowering living standards / cause health issues (1) reduce tourism / negative impact on current account (1)  other forms of power may not be developed (1) example (1)  some workers may leave other jobs (1) these jobs may have better working conditions (1)  coal mining is a relatively dangerous industry (1) so life expectancy may be reduced / creates chronic illnesses / workers unable to work (1).  Global demand for coal may fall (1) impact upon Australia e.g. unsold stock (1).  May rapidly deplete stocks (1) leading to lower exports (1) and less employment (1). 6 Apply this example to all questions with the command word DISCUSS (1g, 1h, 2d, 3d, 4d and 5d) Each point may be credited only once, on either side of an argument, but separate development as to how/why the outcome may differ is rewarded. Generic example Mark Tax revenue may decrease … 1 … because of reason e.g. incomes may be lower. 1 Tax revenue may increase because incomes may be higher i.e. reverse of a previous argument. 0 Tax revenue may increase because of a different reason i.e. not the reverse of a previous argument e.g. government spending on subsidies may stimulate the economy more than spending on education. 1 Question Answer Marks Guidance 1(h) Discuss whether or not Australia is likely to have a budget deficit in 2026. Award up to 4 marks for logical reasons why it might, which may include:  unemployment is forecast to increase (1) so there may be more government spending on unemployment benefits (1) less income tax revenue (1)  there may be more government spending on retraining unemployed workers (1)  some of the rise in population may result in more government spending (1) e.g. on pensions / healthcare / education (up to 2 marks)  budget deficit in previous years (1) would mean interest would have to be paid on the debt that has built up (1). Award up to 4 marks for logical reasons why it might not, which may include:  population and the labour force are forecast to increase (1) so there may be more taxpayers / fewer claiming benefits (1)  tax revenue may rise (1) due to higher profits / higher tax rates (1)  GDP is forecast to increase (1) more people in work (1) which would be likely to increase direct and indirect tax revenue (1)  state support for industries may fall (1) may have been high in 2021 due to Covid-19 (1). 6

This question in 0455/21 May/June 2023

1 (a) Calculate the number of people who were living in poverty in Guyana in 2020. [1] (b) Identify two causes of the decrease in the output of sugar in 2020. [2] (c) Explain how economic growth is measured. [2] (d) Explain two reasons why labour mobility may increase in Guyana in the future. [4] (e) Draw a demand and supply diagram to show the effect of a decrease in the price of rail transport on the market for car transport. [4] (f) Analyse the relationship between GDP per head and internet access. [5] (g) Discuss whether or not the discovery of oil is likely to increase living standards in Guyana. [6] (h) Discuss whether or not Guyana would benefit from an increase in the size of its population. [6]

30 marks

Mark scheme: 1(a) Calculate the number of people who were living in poverty in Guyana in 2020. 276 500 (1). 1 1(b) Identify two causes of the decrease in the output of sugar in 2020. Bad weather (1) falling (global) demand (1). 2 If more than two causes given, consider the first three. 1(c) Explain how economic growth is measured. Real (1) GDP / national / country’s output / income / expenditure (1). 2 If more than two ways given, consider the first three. Not accepting GDP per head for GDP. 1(d) Explain two reasons why labour mobility may increase in Guyana in the future. Logical explanation which might include: Increased government spending on education / improved education (1) improved skills / productivity / occupational mobility (1). Improved / cheaper rail travel / increased spending on infrastructure / improved infrastructure (1) easier to work further away / increased ability to work in other areas / increased geographical mobility (1). Increased government spending on the internet (1) people learn new skills / gain information about job opportunities / increase occupational mobility (1). May be net immigration (1) migrants may be skilled / may be more willing to move to different areas of the country (1). 4 One mark each for each of two reasons identified and one mark each for each of two explanations. If more than two reasons given, consider the first three. Question Answer Marks Guidance 1(e) Draw a demand and supply diagram to show the effect of a decrease in the price of rail transport on the market for car transport. Demand and supply diagram: Axes correctly labelled – price and quantity or p and q (1). Original demand and supply curves correctly labelled (1). Demand curve shifted to the left (1). Equilibriums – shown by lines P1 and Q1 and P2 and Q2 or equilibrium points marked as E1 and E2 (1). 4 Question Answer Marks Guidance 1(f) Analyse the relationship between GDP per head and internet access. Coherent analysis which might include: Expected relationship: Direct / positive (1) the higher the GDP per head, the higher the internet access (1) Supporting evidence: Up to two marks E.g. Iceland with the highest GDP per head had the highest % of the population with internet access Eritrea with the lowest GDP per head had the least internet access France with the second highest GDP per head has the second highest % of population with internet access Analysis of expected relationship: Higher GDP per head increases household’s ability to pay for internet access / higher internet access may increase productivity/efficiency / increase job opportunities (1) higher GDP per head increases tax revenue, some of which can be spent on the provision of internet access / higher productivity/efficiency could increase wages (1). Exception: Guyana / Morocco (1) Guyana had a higher GDP per head but low internet access (1). Analysis of exception: Internet access is determined by other influences e.g. education levels (1). 5 Responses do not have to be in the format suggested but they should address the expected / normal relationship, offer supporting evidence of that, highlight any exceptions to that, and analyse the overall data. In terms of supporting evidence: no marks for just description of the figures e.g. Brazil had a GDP per head of $8717and 72% of the population with internet access / Eritrea had a GDP per head of $643 and 2% of population with internet access. France had a GDP of $40 494 and 83% of the population with internet access etc. In terms of supporting evidence one mark maximum for an indirect comparison e.g. Iceland had a GDP per head of $66 945 and 99% population with internet access whereas in Zambia with a GDP per head of $1,305, only 29% of the population had access to the internet. Question Answer Marks Guidance 1(g) Discuss whether or not the discovery of oil is likely to increase living standards in Guyana. Award up to 4 marks for logical reasons why it might, which may include:  increase exports (1) increase economic growth / higher national output (1) and raise incomes / increase GDP per head (1) increase purchasing power / able to buy more goods and services / able to buy basic necessities (1) could reduce poverty (1)  create jobs / reduce unemployment / increase employment (1) discourage emigration / encourage immigration (1).  raise tax revenue (1) allowing the government to spend more on e.g. education and healthcare (1) MNCs may spend on e.g. improving infrastructure / training (1). Award up to 4 marks for logical reasons why it might not, which may include:  may create pollution (1) create external costs / damage the environment (1) which will harm people’s health / reduce life expectancy (1)  may be poor working conditions in the industry (1) affecting health of workers (1)  the foreign MNC may send much of the profit back to its country (1) it may drive domestic oil firms out of business (1) may deplete the country’s oil reserves (1)  the foreign MNC may employ workers from its own country (1)  global demand for oil may fall /may be overdependence on oil / other countries may impose trade restrictions on oil. (1) 6 3rd bullet point: increase in government spending should be linked to a form of spending that could increase living standards. Apply this example to all questions with the command word DISCUSS (1g, 1h, 2d, 3d, 4d and 5d) Each point may be credited only once, on either side of an argument, but separate development as to how/why the outcome may differ is rewarded. Generic example Mark Tax revenue may decrease … 1 ... because of reason e.g. incomes may be lower. 1 Tax revenue may increase because incomes may be higher i.e. reverse of a previous argument. 0 Tax revenue may increase because of a different reason i.e. not the reverse of a previous argument e.g. government spending on subsidies may stimulate the economy more than spending on education. 1 Question Answer Marks Guidance 1(h) Discuss whether or not Guyana would benefit from an increase in the size of its population. Award up to 4 marks for logical reasons why it might, which may include:  population is below the optimum level / move to the optimum level (1), could make better use of resources (1)  if rise due to immigration (1) may bring in new ideas / new production methods / new skills / new technology (1)  an increase in the size of the labour force (1) if the number of people of working age increases (1) rise in tax revenue (1) allowing the government to spend more on e.g. education and healthcare (1)  consumer expenditure may increase (1) total (aggregate) demand may increase (1)  output could increase / cause economic growth / increase productive potential (1)  dependency ratio could fall (1) Award up to 4 marks for logical reasons why it might not, which may include:  larger population could result in pollution / congestion / overcrowding (1) damage the environment / increase external costs (1)  if rise due to fall in death rate or rise in the birth rate / increase in young / old population (1), the dependency ratio will increase (1) some of the extra population may be unemployed (1) 6 Question Answer Marks Guidance 1(h)  pressure may be put on e.g. housing / welfare payments (1) increasing need for government expenditure (1)  there may be inflation (1)  population may increase to the extent that there is overpopulation (1) resources may be depleted (more quickly) (1). 6

This question in 0455/22 May/June 2023

4 After the recession that struck Albania in 2013, the country experienced a significant rise in emigration. Albanian workers and students in other countries have expressed little desire to return. However, the government is trying to implement policy measures that could attract more people to return to the country. (a) Define emigration. [2] (b) Explain two causes of a recession. [4] (c) Analyse policy measures a government could use to attract workers to return to their home country. [6] (d) Discuss whether or not an economy benefits from many of its students studying abroad. [8]

20 marks

Mark scheme: 4(a) Define emigration. Emigration is when people exit / leave (1) a country (1) to live in another country (1). 2 4(b) Explain two causes of a recession. Logical explanation which might include: Fall in total demand / low economic activity (1) due to lower consumer confidence / falling consumption / falling government spending / falling exports / increase imports (1) Fall in investment (1) leading to fall in productive capacity (1) Fall in population (1) e.g. due to emigration (1) leading to a fall in number of workers (1) Wars / natural disasters (1) causing destruction of factors of production (1) Higher interest rates (1) leading to lower borrowing / consumption / investments (1) Decreased consumer / investor confidence (1) decreasing consumption / capital flight (1) Higher income / corporation taxes (1) leading to falling disposable income for consumption / falling after tax profits leading to lower investments (1) Lower productivity (1) reducing demand for the country’s output (1). 4 If more than two causes given, consider the first three. Question Answer Mark Guidance 4(c) Analyse policy measures a government could use to attract workers to return to their home country. Coherent analysis which might include: Increase national minimum wage (1) attract more unskilled / low−paid workers to return (1). Expansionary fiscal policy / expansionary monetary policy (1) to increase job opportunities (1). Improved education / healthcare / housing (1) higher pensions (1) to raise living standards (1). Better working conditions / quality of life (1) regulations to protect workers from poor treatment (1) better fringe benefits e.g. holiday entitlement Greater security in the country (1) e.g. gun controls (1) Labour market reforms (1) making it easier for firms to hire (1) more job opportunities (1) people return to take up a job (1). Lower direct taxes (1) increase after−tax income / disposable income (1) could encourage more people to work (1) and return to the country to earn income (1). Deregulation (1) encourages more firms to start up (1) more entrepreneurs will want to start a business (1) encouraging more people to return to start their own business (1). Improving incentives to work and invest (1) more investments (1) more demand for workers (1) more job opportunities (1). Measures to reduce inflation (1) making lower cost of living attractive (1) 6 Question Answer Mark Guidance 4(d) Discuss whether or not an economy benefits from many of its students studying abroad. In assessing each answer, use the table opposite. Why it might:  other countries may have better education system enabling students to gain better skills / experiences  when students return to the country, there will be higher productivity i.e. quality of factors of production increases  learn about new technologies which could help the domestic economy in the future  make connections abroad which could help establish future business contacts  new ideas / products which could be brought back for the domestic economy  decrease poverty  leads to further economic development.  less spent on education by government Why it might not:  students studying abroad might not return and stay in the country they studied in (brain drain)  studying abroad is very expensive and lots of money is spent abroad instead of in the domestic economy (money outflow)  only a small proportion of the society can afford studying abroad increasing inequality  Lack of development of higher / university education in the country due to lack of demand.  If inflow of students from abroad is larger than outflow of students, then there may not be a problem.  loss of potential consumption / growth in home country  unemployment of teachers / lecturers in the country, costs to government in benefits 8 Level Description Marks 3 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 2 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 1 There is a simple attempt at using economic definitions and terminology. Some reference may be made to economic theory, with occasional understanding. 1−2 0 A mark of zero should be awarded for no creditable content. 0

This question in 0455/23 May/June 2023

5 In 2020, Paraguay’s Consumer Prices Index rose by 3% and its foreign exchange rate fluctuated. Each year Paraguay experiences net emigration. People leave a country for a number of reasons. These include a low rate of economic growth and high level of market failure. The Paraguayan government does intervene in the economy in an attempt to reduce market failure. (a) Define Consumer Prices Index. [2] (b) Explain two ways a government could intervene to reduce market failure. [4] (c) Analyse how an increase in a country’s foreign exchange rate could reduce inflation. [6] (d) Discuss whether or not an increase in a country’s economic growth rate will reduce emigration from the country. [8]

20 marks

Mark scheme: 5(a) Define a Consumer Prices Index. 2 A measure of inflation / cost of living (1) using weights / basket of goods and services (1). 5(b) Explain two ways a government could intervene to 4 One mark each for each of two ways identified and one reduce market failure. mark each for each of two explanations. Logical explanation which might include: If more than two ways of government intervention are given, Subsidise merit goods (goods with positive externalities) (1) consider the first three. to encourage consumption / production (1). Tax on demerit goods (goods with negative externalities) (1) to discourage consumption / production (1). Apply maximum price on merit goods (1) to increase consumption (1) OR apply minimum price on demerit goods (1) to reduce consumption (1) Finance / produce public goods (1) as private sector firms will have no incentive to produce them (1). Regulate monopolies (1) to restrict exploitation of market power (1). Provide education / training / public information campaign (1) to raise awareness of benefits of a merit good / drawbacks of a demerit good (1) Provide education / training (1) to increase labour mobility (1). 5(c) Analyse how an increase in a country’s foreign 6 exchange rate could reduce inflation. Coherent analysis which might include: A rise in the exchange rate / appreciation of a currency (1) can increase export prices (1) lower import prices (1). Net exports may fall (1) exports form part of total demand (1) reducing demand-pull inflation (1). Lower import prices will increase pressure for firms to keep price rises low (1) lower imported raw material prices (1) reduce costs of production (1) reduce cost-push inflation (1). 5(d) Discuss whether or not an increase in a country’s 8 Level Description Marks economic growth rate will reduce emigration from the country. 3 A reasoned discussion which 6–8 accurately examines both sides of the In assessing each answer, use the table opposite. economic argument, making use of economic information and clear and Why it might: logical analysis to evaluate economic • employment may increase issues and situations. One side of the • people will not have to seek jobs abroad argument may have more depth than • incomes may rise / poverty may decrease the other, but overall, both sided of the • tax revenue may be higher, allowing the government to argument are considered and spend more on e.g. education and healthcare. developed. There is thoughtful evaluation of economic concepts, Why it might not: terminology, information and/or data • incomes may still be low appropriate to the question. The • income can be unevenly distributed discussion may also point out the • may not expect rise in growth rate to last possible uncertainties of alternative • there may be higher economic growth and job decisions and outcomes. opportunities in other countries • pollution levels may increase 2 A reasoned discussion which makes 3–5 • may lead to higher external costs e.g. pollution use of economic information and clear • economic growth comes at cost of worse working analysis to evaluate economic issues and situations. The answer may lack conditions some depth and development may be • there are other reasons for emigrating. one-sided. There is relevant use of economic concepts, terminology, Note: level 1 would be knowledge and understanding of information and data appropriate to the economic growth and emigration or just identification of question. points. 5(d) Level Description Marks 1 There is a simple attempt at using 1–2 economic definitions and terminology. Some reference may be made to economic theory, with occasional understanding. 0 A mark of zero should be awarded for 0 no creditable content.

This question in 0455/23 Oct/Nov 2023

5 New Zealand is a high-income country with a low unemployment rate and a surplus of imports over exports. Recently, its government has made some important economic decisions. In 2022, it banned everyone born after 2008 from buying cigarettes. A year before, it gave permission for firms to explore for oil in the country. (a) Define unemployment rate. [2] (b) Explain two reasons why a government may discourage cigarette smoking. [4] (c) Analyse why a country’s exports may decrease. [6] (d) Discuss whether or not the discovery of oil in a country will benefit its economy. [8]

20 marks

Mark scheme: 5(a) Define unemployment rate. 2 The number of unemployed divided by the labour/work force (multiplied by 100) / the percentage of the labour force without a job (2). Those willing and able to work who cannot find employment (1). 5(b) Explain two reasons why a government may discourage 4 There is a degree of mix and match on this question. Most of smoking. the points may be interpreted as either identification or explanation. Essentially a question on why a government Logical explanation which might include: may discourage smoking. Improve health of those who give up smoking / smoking harms the health of smokers (1) reduce consumption of a demerit good / cigarettes are a demerit good (1) cigarettes are overconsumed / overproduced (1). Increase health of the population / reduce the health damage caused to non-smokers (1) reduce passive smoking / reduce air pollution (1). Reduce market failure (1) reduce external cost / reduce the gap between social costs and social benefits (1). Reduce health care costs (1) more could be spent on e.g. education (1). Increase productivity / stop fall in productivity (1) raise income/GDP / stop fall in income / GDP (1). 5(c) Analyse why a country’s exports may decrease. 6 Coherent analysis which might include: Price of exports may rise / inflation / become less price competitive (1) due to a rise in costs of production (1) a rise in the exchange rate (1) demand may fall (1). Quality of exports may fall (1) workers may be less skilled (1) investment may have decreased (1). Incomes abroad may have declined (1) reducing the purchasing power of foreign buyers (1) reducing foreign countries’ need for capital goods and raw materials (1). Demand in the home country may increase (1) encouraging firms to sell more of their output at home (1). Trade restrictions may be imposed (1) e.g. tariffs / quotas / subsidies / embargoes may be imposed by other countries (1) the government of the country itself may restrict, tax or ban exports (1) to stop depletion of resources / prevent shortage / rise in price on domestic market (1). May be disruptions to production (1) e.g. bad weather/war/pandemic (1) decrease in resources (1). Government subsidies to exporting may be stopped (1) government may switch to subsidising products sold on the home market (1). 5(d) Discuss whether or not the discovery of oil in a country 8 Level Description Marks will benefit its economy. 3 A reasoned discussion which 6–8 In assessing each answer, use the table opposite. accurately examines both sides of the economic argument, making use of Why it might: economic information and clear and • may increase GDP logical analysis to evaluate economic • may increase employment issues and situations. One side of the • may increase incomes argument may have more depth than the other, but overall both sided of the • may increase tax revenue argument are considered and • may increase exports developed. There is thoughtful • reduce imports of oil evaluation of economic concepts, terminology, information and/or data appropriate to the question. The Why it might not: discussion may also point out the • may create pollution possible uncertainties of alternative • may damage wildlife habitats/ areas of natural beauty decisions and outcomes. • may raise the exchange rate • oil may not be in demand – replaced by renewable 2 A reasoned discussion which makes 3–5 use of economic information and clear energy • working conditions may be poor analysis to evaluate economic issues and situations. The answer may lack • extraction may last for a short time – may be deplete some depth and development may be quickly one-sided. There is relevant use of • MNC may extract the oil and not many of the benefits economic concepts, terminology, may go to the domestic economy. information and data appropriate to the question. 1 There is a simple attempt at using 1–2 economic definitions and terminology. Some reference may be made to economic theory, with occasional understanding. 0 A mark of zero should be awarded for 0 no creditable content.

This question in 0455/22 Feb/March 2024

5 In 2020, the price of gold fell in Vietnam. That year, Vietnam was one of Asia’s best performing economies. Unlike some Asian economies, Vietnam did not experience a recession. Its total output, exports and imports all increased. Unemployment did increase from 2.0% to 2.3% but remained very low. One of the aims of fiscal policy can be to achieve full employment. (a) Identify how the effect of a fall in the price of gold would be shown on a demand curve for gold. [2] (b) Explain two disadvantages of a recession. [4] (c) Analyse why a country may demand more imports. [6] (d) Discuss whether or not fiscal policy can achieve full employment. [8]

20 marks

Mark scheme: 5(a) Identify how the effect of a fall in the price of gold would be shown on a demand curve for gold. A movement down the demand curve (1) from left to right / extension (1). A movement along the demand curve (1). down the demand curve. Allow one mark for the idea that demand will rise. 5(b) Explain two disadvantages of a recession. Logical explanation which might include: Lower output / lower GDP (1) lower living standards / higher poverty / less income / less consumer spending (1). Higher unemployment / lower employment (1) higher cost of unemployment benefit (1). Lower investment (1) due to reduction in confidence (1). Firms shutdown (1) due to lower profits (1). Lower tax revenue (1) may cause budget deficit / reduce ability to spend e.g. on education / increase in national debt (1). 4 One mark each for each of two disadvantages identified and one mark for each of two explanations. Question Answer Mark Guidance 5(c) Analyse why a country may demand more imports. Coherent analysis which might include: Price of imports may fall (1) due to a fall in costs of production (1) a rise in the exchange rate (1). Quality of imports may rise (1) foreign workers may be less skilled (1) investment in foreign countries may have decreased (1). Incomes may have increased (1) raising the purchasing power of buyers (1) increasing the country’s’ need for consumer goods (1) which the country cannot produce (1) due to specialisation (1). Trade restrictions may be removed or reduced (1) e.g. lower tariffs / quotas / subsidies / embargoes will make it easier to import (1). Country needs more raw materials / lacks the technology to produce certain goods (1) to enable growth of domestic industries (1). Failure of harvest /natural disaster e.g. rice (1) means need to import the good instead (1). 6 Do not expect, but reward reference to absolute or comparative advantage. A maximum of three marks for only identifying the reasons. Question Answer Mark Guidance 5(d) Discuss whether or not fiscal policy can achieve full employment. In assessing each answer, use the table opposite. Why it might:  higher government spending and/or lower taxation may increase total (aggregate) demand which could reduce cyclical unemployment  government spending on education and training could raise workers’ skills could increase their mobility and may reduce frictional unemployment  government spending on the provision of labour market information may reduce frictional unemployment  government spending on subsidies may lead to firms increasing job opportunities. Why it might not:  government spending may not be raised enough / a cut in taxation may not be sufficient  consumer spending and investment may fall if there is a lack of confidence  net exports may fall if there is a global recession  there may still be some labour immobility due to e.g. differences in house prices in different parts of the country so structural unemployment  increased government spending on benefits may be an encouragement not to work and stay unemployed. 8 See Guidance table at the end of the mark scheme. Do not reward a simple reversal of policies in why it might achieve full employment in the why it might not part of the response. Level Description Marks 3 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 2 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 1 There is a simple attempt at using economic definitions and terminology. Some reference may be made to economic theory, with occasional understanding. 12 0 A mark of zero should be awarded for no creditable content. 0

This question in 0455/21 May/June 2024

1 (a) Calculate the percentage contribution of Jakarta to Indonesia’s GDP in 2021. [1] (b) Identify two examples of external costs ignored by the free market. [2] (c) Explain how real GDP per head can be an indicator of living standards. [2] (d) Explain two ways climate change can lead to a fall in the Human Development Index (HDI) of Indonesia. [4] (e) Draw a production possibility curve (PPC) diagram to show the impact of climate change on an economy such as Indonesia. [4] (f) Analyse the relationship between GDP and government spending on the environment. [5] (g) Discuss whether or not internal migration benefits an economy such as Indonesia. [6] (h) Discuss whether or not relocating the capital city from Jakarta will benefit the Indonesian economy. [6]

30 marks

Mark scheme: 1(a) Calculate the percentage contribution of Jakarta to Indonesia’s GDP in 2021. 27.3%, 27.27%, 27.2%, 27% 1 Accept without the percentage sign. 1(b) Identify two examples of external costs ignored by the free market. air pollution (1) rising sea levels/floods (1) disease / mosquitoes (1) climate change (1) 2 1(c) Explain how real GDP per head can be an indicator of living standards. Real GDP per head has been adjusted for population / inflation / takes account of the cost of living (1). Low real GDP per head leads to a fall in living standards (1) because lower GDP per head would mean lower income / real GDP per head is average income (1) reducing consumption / material wellbeing / influencing how much people can spend / whether they can buy basic necessities (1). 2 Accept answers based on either higher or lower GDP per head. Question Answer Mark Guidance 1(d) Explain two ways climate change can lead to a fall in the Human Development Index (HDI) of Indonesia. Logical explanation which might include: Schools have been flooded (1) reducing education levels / mean years of schooling / expected years of schooling (1). Floods have led to an increase in diseases (transmitted through water and mosquitoes which breed in water) (1) reducing health level / life expectancy / increasing death rate (1). Farmland has been submerged, (cutting off a vital source of income of many farmers) / roads have been destroyed (1) reducing income levels / GNI per capita / GDP per capita / living standards (1). 4 One mark each for each of two ways identified and one mark for each of two explanations. Accept an explanation combining two different ways, e.g. increase in diseases reducing education levels. 1(e) Draw a production possibility curve (PPC) diagram to show the impact of climate change on an economy such as Indonesia. PPC diagram: Axes correctly with different outputs (1). Initial curve drawn as a curve/line sloping downward to the axes (1). New curve drawn as a curve/line sloping downward to the axes (1). Shift to the left indicated by arrow(s) or letters or numbers e.g. PPC1 to PPC2 (1). 4 Question Answer Mark Guidance 1(f) Analyse the relationship between GDP and government spending on the environment. Coherent analysis which might include: Expected relationship: direct relationship / move in the same direction (1) higher GDP may lead to higher government spending on the environment / higher government spending on the environment may increase GDP (1). Supporting evidence: Japan has highest GDP and highest spending on environment (1) France has second highest GDP and second highest spending on environment (1) Thailand has lowest GDP and lowest spending on environment (1). Analysis: Higher GDP may create more pollution, therefore countries have more to spend on environment / high government spending on the environment can reduce pollution/climate change (1). Higher tax revenue / more education and so more concern for the environment / a cleaner environment can raise productivity (1). Higher GDP therefore more developed and can spend more on other objectives such as protection of the environment (1). Exception: Switzerland/Indonesia (1) Switzerland has lower GDP than Indonesia but higher expenditure on environment/ Indonesia has higher GDP and lower expenditure on environment than Switzerland (1). Analysis of the exception: These countries may be facing different pressures on government spending e.g. higher level of poverty (1). 5 Responses do not have to be in the format suggested but they should address the expected/normal relationship, offer supporting evidence of that, highlight any exceptions to that, and analyse the overall data. Question Answer Mark Guidance 1(g) Discuss whether or not internal migration benefits an economy such as Indonesia. Award up to 4 marks for logical reasons why it might, which may include:  higher production of different crops (1) more income / higher living standards (for farmers) (1)  less pressure on government resources / natural resources (1) e.g., less overcrowding (1) less spending on healthcare if people move away from areas of flooding/ mosquitoes (1)  labour force may increase in some areas (1) moving from low productivity areas to high productivity areas(1) increasing output (1)  housing may be cheaper / more available in some areas (1) reducing cost of living for workers (1)  migration may be to high wage areas (1) boosting total demand (1)  fewer resources may be wasted (1) if migration is to an area where they are under-used e.g. schools, hospitals (1). Award up to 4 marks for logical reasons why it might not, which may include:  as workers migrate, it could also lead to the collapse of entire communities (1) without workers (1) less demand for goods and services in the area (1)  increased inequality between more mobile labour and less mobile labour (1) as some workers who cannot move will not be able to find jobs (1) and gain higher income (1)  more pressure on government resources in areas they move to (1) more overcrowding in those areas / housing shortages (1) external costs (1) more pollution / congestion (1). 6 Apply this example to all questions with the command word DISCUSS (1g, 1h, 2d, 3d, 4d and 5d) Accept the reverse argument, (e.g. for Q1g internal migration may be to a less polluted area) but recognise that each point may be credited only once, on either side of an argument, but separate development as to how/why the outcome may differ is rewarded. Generic example mark Tax revenue may decrease… 1 ...because of reason e.g. incomes may be lower. 1 Tax revenue may increase because incomes may be higher i.e. reverse of a previous argument. 0 Tax revenue may increase because of a different reason i.e. not the reverse of a previous argument e.g. government spending on subsidies may stimulate the economy more than spending on education. 1 Question Answer Mark Guidance 1(h) Discuss whether or not relocating the capital city from Jakarta will benefit the Indonesian economy. Award up to 4 marks for logical reasons why it might, which may include:  the new city will provide new job opportunities (1) decreasing unemployment in Indonesia (1) increasing incomes / economic growth (1)  reduce inequality between the different regions of Indonesia (1) reducing social dissatisfaction / increase standards of living of everyone in Indonesia (1)  better environment as new city is carbon-neutral / less pollution (1) reduced external costs (1)  better health for population of Indonesia (1) higher productivity (1)  fewer floods that require expenditure to repair the damage (1)  foreign investors may be more willing to relocate to Indonesia (1). Award up to 4 marks for logical reasons why it might not, which may include:  cost of the move may be too high (1) opportunity cost in terms of other areas of government spending (1) e.g. education / healthcare in other regions (1) could result in higher taxes / government budget deficit (1)  the relocation is expected to benefit only a small number of people who already have the financial capital / connection to the government (1) inequality could rise (1)  people may be reluctant to leave Jakarta (1) causing the resources invested in the new city to be wasted (1). 6

This question in 0455/23 May/June 2024

5 In 2020, investment in vaccine production was very high. There was a plan for a major vaccine producer to horizontally merge with another firm but the plan was cancelled. This was not surprising as a similar merger of two firms in the same industry had failed the previous year. However, most firms in this industry are still meeting their objectives and also creating many external benefits for the wider economy. (a) Identify two benefits of a horizontal merger. [2] (b) Explain two possible external benefits of vaccines. [4] (c) Analyse potential reasons why a merged firm may fail. [6] (d) Discuss whether or not investment is beneficial to an economy. [8]

20 marks

Mark scheme: 5(a) Identify two benefits of a horizontal merger.  economies of scale / lower costs  lower prices (for consumers)  sharing of each firm's strengths  more capital available  market power / higher prices  higher quality  more efficient use of resources  higher profit  international competitiveness 2 Higher revenue not accepted. 5(b) Explain two possible external benefits of vaccines. Logical explanation which might include:  healthier overall population (1) reduced risk for others to become infected / for those who have been vaccinated to spread the disease to the rest of the population (1)  improved HDI (1) life expectancy is part of a country's HDI (1)  reduced long term spending on healthcare (1) freeing funds for other areas (1)  healthier labour force (1) higher productivity / higher output / lower prices (1)  more jobs to the community near the vaccine production site (1) higher incomes / lower unemployment (1)  increased medical research and development/ innovation (1) helps other fields in medicine and science (1). 4 Question Answer Mark Guidance 5(c) Analyse potential reasons why a merged firm may fail. Coherent analysis which might include:  diseconomies of scale (1) higher long run (average) cost as output increases (1) decreasing profits (1)  lack of coordination (1) difficult to coordinate between the different departments in a larger company (1) may require additional managers / processes (1)  lack of control (1) difficult to ensure everyone in a large company is working towards the same goal (1) increased absences / slacking-off (1)  lack of cooperation / disagreements (1) no sense of belonging and personal connections (1) and therefore workers may not want to work with each other (1)  lack of synergy (1) different parts of the merged companies can’t work well with each other (1) don’t have the same philosophy / management styles (1)  reduced competition may increase complacency / reduce efficiency / innovation (1) lower quality (1) reduce demand (1)  other possible reasons for failure, not directly related to merger, e.g. fall in demand (1) supply chain difficulties (1). 6 Question Answer Mark Guidance 5(d) Discuss whether or not investment is beneficial to an economy. In assessing each answer, use the table opposite. Why it might:  improves productivity / technological innovation  creates jobs – decreasing unemployment  consumers may benefit if investment reduces prices, improves quality of products  increases total demand and output of the economy – economic growth  improves quality of education  improves quality of health  if FDI, it provides funds not available in home country. Why it might not:  if financed by borrowing, affected by interest rate changes  creates inflation in short run  increases pollution – external cost  if foreign investment – overdependence on foreign parties  increased inequality  increased unemployment if capital goods act as a substitute for labour  opportunity cost in the form of fewer consumer goods in the short run. 8 Level Description Marks 3 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 sided 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 2 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 1 There is a simple attempt at using economic definitions and terminology. Some reference may be made to economic theory, with occasional understanding. 1–2 Question Answer Mark Guidance 5(d) Level Description Marks 0 A mark of zero should be awarded for no creditable content. 0

This question in 0455/23 May/June 2024

5 The Peruvian government is under pressure from its industries to improve the country’s transport system. Peru’s third largest industry is tourism. There are many firms in the Peruvian tourism industry. Another major industry in Peru is fruit farming. In recent years, trade union membership in the Peruvian fruit-farming industry has increased. (a) Identify two examples of labour employed in the tourism industry. [2] (b) Explain two reasons why countries with a good transport system often have a high GDP. [4] (c) Analyse the benefits consumers may gain from a competitive market. [6] (d) Discuss whether or not an increase in trade union membership will benefit an economy. [8]

20 marks

Mark scheme: 5(a) Identify two examples of labour employed in the tourism 2 Also accept skilled and unskilled. industry. Do not accept driver or car driver on their own. Could accept Two from e.g. e.g. a driver who transports tourists, • tour guides • hotel manager / hotel worker • travel agent • flight attendant • coach / bus driver 5(b) Explain two reasons why countries with a good 4 One mark each for each of two reasons identified and one transport system often have a high GDP. mark for each of two explanations. Logical explanation which might include: Accept: increase accessibility. Lower firms’ costs of production (1) cheaper to move goods/imports/exports / move goods/raw materials//imports/exports more efficiently / increase international competitiveness and so increase exports / higher income / increase size of markets / higher total demand (1). Reduce wastage (1) food etc more likely to arrive fresh and so increase earnings for sale of e.g food / higher profits (1). Increase labour mobility / easier to get to work (1) reduce unemployment / increase productivity (1). Less congestion (1) less stress / less time lost (1). Increase (earnings from) tourism (1) cheaper / easier to move around the country (1). Attract MNCs/FDI / increase investment (1) increase employment (1) increase productive capacity (1). Fewer accidents (1) avoid loss of workers / avoid loss of working hours (1). Less pollution (1) healthier labour force (1). 5(c) Analyse the benefits consumers may gain from a 6 competitive market. Coherent analysis which might include: A competitive market has a large number of firms producing the product / no barriers to entry (1) substitutes available (1). Low prices (1) as firms try to gain a larger share of the market / attract consumers / increase purchasing power (1). High quality (1) as competition can increase efficiency (1) increase innovation (1). Choice (1) different versions of the product may be produced / greater range of products / greater variety (1). Responsive to changes in consumer demand (1) consumer sovereignty (1). 5(d) Discuss whether or not an increase in trade union Maximum of L2 4 marks if candidate answers in reverse membership will benefit an economy. based on a misinterpretation – an increase in trade union fees. In assessing each answer, use the table opposite. Level Description Marks Why it might: • rise in wages and improved working conditions may 3 A reasoned discussion which 6–8 increase productivity accurately examines both sides of the • higher wages may increase total demand which may economic argument, making use of increase real GDP economic information and clear and • improved working conditions would increase living logical analysis to evaluate economic standards issues and situations. One side of the • by providing a channel of communication, it may reduce argument may have more depth than conflicts between workers and employers the other, but overall both sided of the • by helping with training may raise output. argument are considered and developed. There is thoughtful evaluation of economic concepts, Why it might not: terminology, information and/or data • higher wages may increase inflation appropriate to the question. The • may take industrial action e.g. strikes which could lower discussion may also point out the output / GDP possible uncertainties of alternative • may resist job losses / introduction of new technology decisions and outcomes. which may prevent increases in efficiency. 2 A reasoned discussion which makes 3–5 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. 5(d) Level Description Marks 1 There is a simple attempt at using 1–2 economic definitions and terminology. Some reference may be made to economic theory, with occasional understanding. 0 A mark of zero should be awarded for 0 no creditable content.

This question in 0455/22 Oct/Nov 2024

4 In 2023, India became the country with the largest population. This may affect the government’s macroeconomic aims. In 2018, the Indian Government cut the country’s corporation (corporate income) tax rate from 35% to 25%. Between 2019 and 2022, India’s inflation rate averaged 6%. Some economists suggested that to achieve its central inflation rate target, the government should cut its spending. (a) Identify two macroeconomic aims of government that may conflict. [2] (b) Explain two reasons why a country may have a high population growth rate. [4] (c) Analyse how a cut in the corporation (corporate income) tax rate can increase economic growth. [6] (d) Discuss whether or not a decrease in government spending will reduce inflation. [8]

20 marks

Mark scheme: 4(a) Identify two macroeconomic aims of government that 2 If more than two macroeconomic aims given, consider the may conflict. first three. • Full employment / low unemployment (1) and price Allow any macroeconomic aim. stability (1). • Economic growth (1) current account balance (1). • Price stability (1) redistribution of income / poverty reduction (1). • Economic growth (1) economic sustainability (1). 4(b) Explain two reasons why a country may have a high 4 One mark each for each of two reasons identified and one population growth rate. mark each for each of two explanations. Logical explanation which might include: If more than two reasons given, consider the first three. • High birth rate (1) due to e.g. low age of marriage / lack of education on birth control (1). • Low death rate / high life expectancy (1) due to e.g. good quality healthcare (1). • Immigration /net immigration (1) due to e.g. high incomes (1). • High fertility rates (1) due to e.g. young female population (1). • Birth rate higher than the death rate (1) results in higher natural growth rate (1). 4(c) Analyse how a cut in the corporation (corporate income) 6 Do not credit answers that refer to income tax or any other tax rate can increase economic growth. tax than corporation tax. Coherent analysis which might include: • Cut in corporation (corporate income) tax will increase the amount of profits that can be kept by firms (1) may attract MNCs to country (1) this will increase the funds firms have to spend (1) on capital goods (1) and increase incentive to invest (1) more to spend on wages (1) may create job opportunities / reduce unemployment (1) raise consumer expenditure (1) firms grow faster (1). • Higher investment (1) will increase total demand (1). It may also increase the quality of capital goods (1) may introduce new technology (1) may increase productivity /productive capacity (1) increase output / GDP (1). • Provide an incentive to enterprise (1) as more profits can be retained / higher profits (1). 4(d) Discuss whether or not a decrease in government 8 Level Description Marks spending will reduce inflation. 3 A reasoned discussion which accurately 6–8 In assessing each answer, use the table opposite. examines both sides of the economic argument, making use of economic Why it might: information and clear and logical • may reduce total demand analysis to evaluate economic issues • lower total demand may reduce demand-pull inflation and situations. One side of the • if near full employment, lower demand may have a argument may have more depth than significant impact on inflation the other, but overall both sides of the • may reduce need for taxes, lower indirect taxes may argument are considered and reduce prices. developed. There is thoughtful evaluation of economic concepts, Why it might not: terminology, information and/or data • lower government subsidies may raise prices appropriate to the question. The • lower government spending on education and training discussion may also point out the may reduce productivity and may increase cost of possible uncertainties of alternative production decisions and outcomes. • lower government spending on infrastructure could increase transport costs 2 A reasoned discussion which makes 3–5 • higher costs of production may increase cost-push use of economic information and clear inflation analysis to evaluate economic issues • may be other causes of inflation e.g. rise in wages 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. 4(d) 8 Level Description Marks 1 There is a simple attempt at using 1–2 economic definitions and terminology. Some reference may be made to economic theory, with occasional understanding. 0 A mark of zero should be awarded for 0 no creditable content.

This question in 0455/21 May/June 2025

1 (a) Calculate the number of people who are in poverty in Egypt. [1] (b) Identify two of Egypt’s primary sector exports. [2] (c) Explain how building a new city can reduce unemployment. [2] (d) Explain why tourism is a good source of economic growth for Egypt. [4] (e) Draw a demand and supply diagram to show the likely effect of falling incomes on the market for housing in the new city. [4] (f) Analyse the relationship between investment (as a % of GDP) and economic growth rates for Egypt. [5] (g) Discuss whether or not deregulation in education in Egypt will increase living standards. [6] (h) Discuss whether or not a fall in the value of the Egyptian currency would harm the Egyptian economy. [6]

30 marks

Mark scheme: Question Answer Mark Guidance 1(a) Calculate the number of people who are in poverty in 1 30 690 000 Egypt. Accept 30.7 million. 30.69 million 1(b) Identify two of Egypt’s primary sector exports. 2 Accept any two Two from: oil (1), citrus fruits (1), gold (1) 1(c) Explain how building a new city can reduce 2 Only one mark if not linked to building. unemployment. Building a new city requires labour / creates job opportunities / increases demand for labour (1) to work in construction / build new buildings (1). 1(d) Explain why tourism is a good source of economic 4 Award a maximum of 2 marks for just identification of points growth for Egypt. without explanation. Logical explanation which might include: Egypt has many ancient / human-made attractions and buildings (1) not found in many parts of the world / that tourists want to visit (1) creating more employment / tax revenue (1). Egypt has natural attractions, such as beautiful beaches / warm climate / good weather (1) these attract tourists / low government spending required / low investments required (1). Egypt has good infrastructure (1) this can attract tourists as its easier to travel to the country or attractions / can attract investors with lower cost of production (1). Egypt has good security (1) tourists feel safe / investors are confident in the security of their investments (1). Egypt has experienced a fall its currency value (1) making holidays more affordable (1). 1(e) Draw a demand and supply diagram to show the likely 4 effect of falling incomes on the market for housing in the new city. D&S diagram: Axes correctly labelled – price and quantity or p and q (1). Original demand and supply curves correctly labelled (1). New demand curve shifted to the left (1). Equilibriums – shown by lines P1 and Q1 and P2 and Q2 or equilibrium points marked as E1 and E2 (1). 1(f) Analyse the relationship between investment (as a % of 5 Responses do not have to be in the format suggested but GDP) and economic growth rates for Egypt. they should address the expected / normal relationship, offer supporting evidence of that, highlight any exceptions to that, Coherent analysis which might include: and analyse the overall data. Expected relationship: Positive / direct (1) higher / lower investment should lead to higher / lower economic growth rates (1). Supporting evidence: From 2017–2019, Investment rising and economic growth also rising (1) From 2019–2020, investment falling and economic growth also falling (1). Analysis: Higher investment leads to higher economic growth due to higher total demand / investment is a component of total demand (1) and increased productivity / lower cost of production (1). Exception: identification of an exception 2015–2017 or 2020–21 (1), 2015–2017, investment rising but economic growth falling slightly / relatively stable / largely unchanged (1), 2020–2021, investment falling but economic growth rate rising (1). Analysis of the exception: Current investment increase now could lead to a delayed response in economic growth rates (1) data shows percentage not total investment (1). 1(g) Discuss whether or not deregulation in education in 6 Answers not referring to education, max 3 marks. Egypt will increase living standards. Apply this example to all questions with the command Award up to 4 marks for logical reasons why it might, which word DISCUSS may include: (1(g), 1(h), 2(d), 3(d), 4(d) and 5(d)) • deregulation has led to an increased number of schools / universities in Egypt (1) may increase competition Each point may be credited only once, on either side of an between private schools / universities (1) may lower argument, but separate development as to how/why the fees (1) raise quality (1) outcome may differ is rewarded. • more people have opportunities for education and training (1) making people more educated / skilled / Generic example mark qualified / literate / productive (1) easier to find jobs (1) earn an income (1) increasing affordability of goods and Tax revenue may decrease 1 services (1) more educated people tend to enjoy better health / spend more on healthcare (1) longer life because of reason e.g. incomes may be lower. 1 expectancy (1) increase HDI (1) • more school buildings will increase employment (1) of Tax revenue may increase because incomes 0 builders (1) teachers (1) may be higher i.e. reverse of a previous • may reduce government spending on education (1) argument. allowing the government to spend more on items that could increase living standards e.g. healthcare (1). Tax revenue may increase because of a different 1 reason i.e. not the reverse of a previous Award up to 4 marks for logical reasons why it might not: argument e.g. government spending on • opening more private schools and universities in Egypt subsidies may stimulate the economy more than might increase the level of inequality (1) as private spending on education. education remains unaffordable to lower income groups (1) restricting their employment opportunities (1) as private education is usually more expensive than state- provided education (1) • standards of living only improve for those from higher income groups (1) lower income groups remain in relative poverty (1) widen gap between rich and poor / increase relative poverty (1) • private schools and universities may prioritise profits (1) over the quality / standards of education provided (1). 1(h) Discuss whether or not a fall in the value of the 6 One mark for identifying increase or decrease in investment. Egyptian currency would harm the Egyptian economy. Award up to 4 marks for logical reasons why it might, which may include: • fall in the value of the Egyptian currency may cause cost push (1) inflation (1) reducing the purchasing power of Egyptians (1) as imported goods become more expensive (1) standards of living could decrease (1) • cost of production could increase (1) increasing the price of domestically produced goods (1) some firms may try to cut cost by reducing jobs (1) increase unemployment (1) • may create uncertainty / reduce confidence (1) discourage investment (1). Award up to 4 marks for logical reasons why it might not, which may include: • Egyptian exports become cheaper (1) increasing demand for exports / increasing revenues of domestic producers / incomes (1) causing economic growth (1) demand may switch from imports to domestically produced products (1) may reduce current account deficit (1) • industries such as the tourism industry may benefit (1) as holidays in Egypt become more affordable for non- Egyptians (1) • workers also have more job opportunities (1) since there is more demand for domestically produced goods and services (1) • may increase investment / hot money flows (1) reduced cost to set up an MNC / may expect profit if currency value rises later (1).

This question in 0455/23 May/June 2025

2 In the first half of 2022, Guyana’s GDP grew by 36.4%. Most of this growth was due to higher output in the primary sector. The government used some of the tax revenue generated from this growth to fund long‑run development projects such as infrastructure and education. However, in the short run, there was a rise in house prices. (a) Identify two examples of primary sector industries. [2] (b) Explain two causes of rising GDP. [4] (c) Analyse why house prices may increase. [6] (d) Discuss whether or not increased government spending on education will lead to economic development. [8]

20 marks

Mark scheme: 2(a) Identify two examples of primary sector industries. 2 If more than two primary industries are given, consider the first three. Two from: Accept two specific examples, e.g. growing wheat, catching • farming / agriculture tuna, but not from the same industry. • mining • fishing • forestry 2(b) Explain two causes of rising GDP. 4 One mark each for two causes identified and one each for two explanations. Logical explanation which might include: Only reward increase in total demand once. • increased consumption (1) decrease in taxes (1) such as income tax / corporation tax (1) increased disposable income /profits (1) • increase in investment (1) leading to increase in total demand (1) • increase in government spending (1) e.g. spending on infrastructure (1) increasing total (aggregate) demand in the economy (1) • improvements in technology (1) increase in productivity (1) • increase in the quantity (1) and quality of factors of production (1) e.g. increase in size of labour force (1) improved labour skills (1) increase in productive capacity of the economy (1) • decrease in interest rates (1) cost of borrowing falls (1) borrowing increases (1) • decreases in exchange rate (1) price of exports falls / price of imports rises (1) increase exports / decrease imports / increase net exports (1). 2(c) Analyse why house prices may increase. 6 MAXIMUM 4 MARKS for identification of reasons without analysis in terms of demand and / or supply. Coherent analysis which might include the following. Increase in demand (1) due to lower interest rates (1) increasing borrowing for house purchases (1) higher population (1) higher incomes (1) increasing ability to purchase houses (1) higher confidence (1) increasing willingness to buy houses (1). Decrease in supply (1) reduction in subsidies on new house building (1) increased taxation on housing (1) government building fewer houses (1) stricter planning regulation (1) land is used for other things e.g. infrastructure (1). Increasing cost of production of new houses (1) cost of labour (1) cost of raw materials (1) cost of land (1) increased costs passed on to buyers of houses as higher prices (1). Less government intervention (1) removal of price controls (1). 2(d) Discuss whether or not increased government spending 8 Level Description Marks on education will lead to economic development. 3 A reasoned discussion which 6–8 In assessing each answer, use the table opposite. accurately examines both sides of the economic argument, making use Why it might: of economic information and clear and logical analysis to evaluate • increase skills / qualifications / knowledge economic issues and situations. One • increase job opportunities side of the argument may have more • encourage more investments depth than the other, but overall, • increase productive capacity both sides of the argument are • reduce consumption of demerit goods considered and developed. There is • improved health / life expectancy thoughtful evaluation of economic • higher HDI concepts, terminology, information and/or data appropriate to the question. The discussion may also point out the possible uncertainties of alternative decisions and outcomes. 2 A reasoned discussion which makes 3–5 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. 2(d) Why it might not: Level Description Marks • takes a long time to have an impact on the economy 1 There is a simple attempt at using 1–2 • financial cost of government spending e.g. taxation / economic definitions and borrowing terminology. Some reference may be • opportunity cost e.g. health spending made to economic theory, with occasional understanding. • reduced benefit to the economy if there is emigration of skilled workers / net migration is negative 0 A mark of zero should be awarded 0 • government might spend the money inefficiently for no creditable content. • education programmes may be ineffective.

This question in 0455/21 Oct/Nov 2025

5 Street vendors mostly operate outside of the formal economy to avoid government regulation. However, many are now entering the formal economy. This has led to more government revenue, increased productivity and higher economic growth. Some governments plan to take measures to increase the number of firms in the economy. (a) Identify two reasons why workers may choose to work in the formal economy. [2] (b) Explain two effects of economic growth on a country’s population. [4] (c) Analyse how government regulation can reduce market failure. [6] (d) Discuss whether or not an increase in the number of firms will benefit an economy. [8]

20 marks

Mark scheme: 5(a) Identify two reasons why workers may choose to work 2 Accept any relevant reason. in the formal economy. If more than two suggested measures are given, consider Two from: the first three. • higher incomes in the formal economy • may have access to employment protection • may be covered by a national minimum wage • may be able to join a trade union • may be entitled to receive unemployment benefit • may be entitled to retirement benefits / pensions • will have a formal income record needed for e.g. bank loans • formal economy may be regulated by government. 5(b) Explain two effects of economic growth on a country’s 4 One mark each for effects identified and one mark each for population. explanations. Logical explanation which might include: If more than two effects are given, consider the first three. • more goods and services available / greater ability to purchase health care (1) higher living standards / life expectancy (1) less poverty (1) • higher employment / more job opportunities (1) more income (1) • more choice (1) due to more firms starting up / expanding (1) • lower inflation (1) if due to higher productivity / lower costs / more competition (1) • higher tax revenue (1) allows more government spending on e.g. education / health (1) • higher prices (1) due to increasing total demand (1) • more pollution / external costs (1) due to higher output of manufactured goods (1) • depletion of non-renewable resources (1) reducing future economic growth (1) • attracts immigrants / deters emigrants (1) due to benefits from high living standards e.g. job opportunities (1). 5(c) Analyse how government regulation can reduce market 6 Only reward answers that refer to laws and regulations, failure. not taxes and subsidies. Coherent analysis which might include: market failure occurs when there is an inefficient allocation of resources in a free market (1). laws / rules can be used (1): • to promote the use of merit goods (1) that are under- consumed (1) e.g. making it compulsory to wear seat belts in a car (1) • to reduce the consumption of demerit goods (1) that are over-consumed (1) e.g. banning smoking in public places (1) • to ensure minimum standards for goods and services (1) e.g. making it compulsory for restaurants to reach certain standards of cleanliness (1) can overcome the problem of sellers having more information than buyers (1). • to prevent abuse of monopoly power (1) by imposing maximum prices (1) e.g. a limit can be imposed on the price that can be charged by a monopoly water company (1) • to reduce exploitation of labour (1) by imposing minimum wages (1). 5(d) Discuss whether or not an increase in the number of 8 Level Description Marks firms will benefit an economy. 3 A reasoned discussion which 6-8 In assessing each answer, use the table opposite. accurately examines both sides of the economic argument, making use Why it might: of economic information and clear • may increase competition and logical analysis to evaluate • higher competition may lower costs and prices and economic issues and situations. One increase quality side of the argument may have more • may increase choice depth than the other, but overall, • may reduce monopoly power both sided of the argument are • more firms may increase output considered and developed. There is • higher output may increase employment and living thoughtful evaluation of economic standards. concepts, terminology, information and/or data appropriate to the question. The discussion may also point out the possible uncertainties of alternative decisions and outcomes. 2 A reasoned discussion which makes 3-5 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. 5(d) Why it might not: Level Description Marks • firms may be smaller • may not be able to take advantage of economies of 1 There is a simple attempt at using 1-2 scale economic definitions and • may be wasteful duplication terminology. Some reference may be • may have lower profits and so invest less, lower made to economic theory, with innovation. occasional understanding. 0 A mark of zero should be awarded 0 for no creditable content.

This question in 0455/21 Oct/Nov 2025

5 In 2023, the Canadian Prime Minister said that his country’s aim was to increase immigration to half a million a year. This was because the country was experiencing labour shortages and an increase in life expectancy. More workers in Canada would increase the tax revenue available to spend on pensions, and more workers would also increase consumer spending. An increase in the immigration of both skilled and unskilled workers might affect the country’s car industry. (a) Identify two causes of an increase in life expectancy. [2] (b) Explain two ways a firm could attract skilled workers from another country. [4] (c) Analyse how an increase in consumer spending could increase economic growth. [6] (d) Discuss whether or not the wages of workers employed by car firms will increase in the future. [8]

20 marks

Mark scheme: 5(a) Identify two causes of an increase in life expectancy. 2 If more than two causes are given, consider the first three. Two causes from: There may be other relevant causes. These are the most common ones. • falling death rate / more / better healthcare / healthier lifestyles • better education • higher (disposable) income • improvement in nutrition • more / better housing / living standards • better environment / less pollution • better working conditions • less child poverty • ending of a war / famine / natural disaster. 5(b) Explain two ways a firm could attract skilled workers 4 One mark each for two ways identified and one mark each from another country. for two explanations. Logical explanation which might include: If more than two ways are given, consider the first three. • offer higher wages / prospects of promotion (1) enabling the workers to enjoy high living standards (1) • offer better working conditions (1) e.g. regular breaks (1) • offer fringe benefits (1) e.g. good pension scheme (1) • offer training (1) increase chance of a good job in home country later (1) • strong / targeted marketing overseas (1) highlighting benefits of job (1) • meet relocation costs (1) removes geographical barrier (1) • reputation (1) e.g. good employer / outstanding product/service (1). 5(c) Analyse how an increase in consumer spending could 6 Only reward increasing productive capacity and raising GDP increase economic growth. once. Coherent analysis which might include an increase in Reward but do not expect reference to the multiplier effect. consumer spending may: • increase total demand (1) this may increase confidence (1) may encourage firms to increase their output (1) firms’ revenue / profits increase (1) leads to more investment / innovation (1) new firms may start up (1) raise GDP (1) • increase output, firms may buy capital goods / invest (1) this will increase productive capacity (1) • increase output, more workers may be employed (1) this will reduce unemployment (1) increase incomes (1) increase consumer spending further (1) • increase (indirect) tax revenue (1) which can be spent on e.g. infrastructure / education / healthcare (1) leading to further increase in productive capacity / GDP (1). 5(d) Discuss whether or not the wages of workers employed 8 Level Description Marks by car firms will increase in the future. 3 A reasoned discussion which accurately 6–8 In assessing each answer, use the table opposite. examines both sides of the economic argument, making use of economic Why they might: information and clear and logical analysis • demand for cars might rise to evaluate economic issues and • revenue / profit may increase, enabling firms to pay situations. One side of the argument may more have more depth than the other, but • car workers may become more skilled / more productive overall, both sides of the argument are • bargaining strength to car workers may increase / their considered and developed. trade unions may become more powerful / inflation rate may increase causing higher wage demands There is thoughtful evaluation of • governments may subsidise car production. economic concepts, terminology, information and/or data appropriate to Why they might not: the question. The discussion may also • advances in technology may reduce the need for car point out the possible uncertainties of workers alternative decisions and outcomes. • rise in unemployment will increase competition among workers for jobs 2 A reasoned discussion which makes use 3–5 • increased immigration may increase the supply of car of economic information and clear workers analysis to evaluate economic issues • demand for cars may fall if public (mass) transport and situations. The answer may lack improves some depth and development may be • inflation may reduce real wages. one-sided. There is relevant use of economic concepts, terminology, information and data appropriate to the question. 5(d) Level Description Marks 1 There is a simple attempt at using 1–2 economic definitions and terminology. Some reference may be made to economic theory, with occasional understanding. 0 A mark of zero should be awarded for no 0 creditable content. L1 and up to 2 marks for understanding of wages, firms and employment.

This question in 0455/23 Oct/Nov 2025