Questions as text
Q1 · Spain has had one of the highest unemployment rates in Europe 0455/22 May/June 2017
7 Spain has had one of the highest unemployment rates in Europe. Moreover, 3.5 million of those unemployed had been out of work for at least a year by 2015. The Spanish Government has introduced a range of policy measures, including increased government spending, to reduce unemployment and poverty. It has also tried to help firms make the supply of their products more elastic. (a) Identify two problems that prevent a worker finding employment. [2] (b) Explain two costs of long-term unemployment to those who are unemployed. [4] (c) Analyse why price elasticity of supply can differ between products. [6] (d) Discuss whether increasing government spending will reduce poverty. [8]
20 marks
Mark scheme: 7(a) Identify two problems that prevent a worker finding employment. • lack of information on jobs available • lack of vacancies/low demand for labour • lack of skills/qualifications /experience/occupational mobility • lack of geographical mobility • possible age/gender/race/disability discrimination 2 Do not accept sickness/idleness. 7(b) Explain two costs of long-term unemployment to those who are unemployed. 1 mark each for each of two costs identified: • loss of income • reduced ability to get a job • reduced confidence/self-worth • decline in health • reduced ability to educate children • loss of skills 1 mark each for each of two explanations given: • the unemployed may receive unemployment benefits which are usually lower than wages or may receive no income/may experience poverty • will lose out on training by not keeping up with advances in technology • unemployment reduces confidence which makes it harder for someone to get another job • unemployment can lead to mental health problems/may increase physical illness due to less nutritious diet and poor housing • lower income may mean children of the unemployed will receive less education which will reduce their chances of getting a job 4 Question Answer Marks Guidance 7(c) Analyse why price elasticity of supply can differ between products. • Products which can be produced quickly (1) will have elastic supply (1) • Products which can be stored/non-perishable (1) will have elastic supply (1) • Products which are made with raw materials in short supply (1) will have inelastic supply (1) • Products made by firms with spare capacity/mobile resources/have a low cost of altering production/low cost of attracting resources into the industry (1) may have elastic supply (1) 6 Vice versa is acceptable i.e. some products may have inelastic supply. Note: can accept low cost of production for the last bullet point. 7(d) Discuss whether increasing government spending will reduce poverty Up to 5 marks for why it may: • Increased government spending on benefits (1) will enable the poor to purchase basic necessities (1) • Increased government spending on education (1) will increase skills (1) increasing employment (1) raising wages (1) • Increased government spending may increase total demand (1) may raise GDP per head (1) • Increased government spending on healthcare (1) may keep people healthier (1) increasing their ability to earn income (1) • Increased government spending on infrastructure (1) will create jobs (1) increase income (1) Up to 5 marks for why it may not: • Increased government spending may cause inflation (1) reduce ability of poor to purchase basic necessities (1) • Increased government spending on benefits may increase reliance on benefits (1) which in the long term may reduce a person’s earning potential (1) • Increased government spending may be financed by higher taxation (1) not increasing total demand (1) • Increased government spending on education may not improve the quality of education (1) may be in wrong areas (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 0455/22 May/June 2017
Q2 · Despite encouragement from central banks, in 2015 some commercial banks were still… 0455/21 Oct/Nov 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
Q3 · Crisis in the ice cream market Vanilla is used in the production of soft drinks, cakes… 0455/22 May/June 2018
1 Crisis in the ice cream market Vanilla is used in the production of soft drinks, cakes and perfumes. Its main use, however, is in the production of ice cream. Fig. 1 shows the different costs of making ice cream for one firm. Fig. 1 The costs of producing ice cream for one firm raw materials including vanilla other wages insurance security lighting rent Madagascar is the world’s largest supplier of vanilla followed by Mexico and Tahiti. At the start of 2016, economists expected the price of ice cream to increase as the price of vanilla had risen by 130% in 2015. This was largely because of the poor harvests in Madagascar which reduced the output of vanilla in 2015. Ice cream is seen as a luxury product in most countries. It has a range of substitutes and this is one reason why producers do not always pass on higher costs to consumers. In 2015, there were a number of other changes in the production of ice cream including a rise in the productivity of the workers. As well as vanilla, Madagascar produces a number of other primary products including coffee and sugar. Nearly 80% of the country’s labour force is employed in the primary sector. The country has a relatively low Gross Domestic Product (GDP) per head and a relatively low Human Development Index (HDI) value as shown in Table 1. This limits the amount that people in Madagascar save. Table 1 GDP per head and HDI in selected countries in 2015 Country GDP per head (US$) HDI Argentina 22 400 0.836 Bangladesh 3 600 0.570 Cuba 10 200 0.769 Egypt 11 500 0.690 Ghana 4 300 0.579 Madagascar 1 500 0.510 Half of Madagascar’s population live in poverty. The government is trying to reduce poverty by introducing a programme of cash benefits. It is hoped that one effect of this will be to increase school enrolment and attendance of the children of poor families. To increase economic growth, the government has sold off a number of state-owned enterprises and is moving the economy towards a market system. (a) Identify two fixed costs of production in Fig. 1. [2] (b) Explain, using information from the extract, two reasons why a rise in the price of vanilla might not cause an increase in the price of ice cream. [4] (c) Analyse, using a demand and supply diagram, the effect of an increase in income on the market for ice cream. [5] (d) Analyse the extent to which the relationship shown in Table 1 between countries’ GDP per head and their HDI value is the expected one. [4] (e) Discuss whether or not a government should encourage people to save more. [5] (f) Explain, using information from the extract, how cash benefits given to the poor can reduce poverty. [4] (g) Discuss whether or not a market system benefits consumers. [6]
30 marks
Mark scheme: 1(a) Identify two fixed costs of production in Fig.1. One mark each for any 2 from: insurance, security, rent, lighting and wages. 2 are given, consider only the first three. 1(b) Explain, using information from the extract, two reasons why a rise in the price of vanilla might not cause an increase in the price of ice cream. Ice cream is a luxury product (1) likely to have elastic demand / producers will be concerned that a rise in price could cause a fall in revenue/profit/demand (1). Ice cream has substitutes (1) likely to have elastic demand / producers will be concerned that a rise in price could cause a fall in revenue / loss of customers / loss of demand (1). Rise in productivity of workers (1) fall in labour costs / lower costs may offset a rise in the price of vanilla (1). Fall in another cost identified in the pie chart (1) may offset a rise in the price of vanilla (1), 4 Question Answer Marks Guidance 1(c) Analyse, using a demand and supply diagram, the effect of an increase in income on the market for ice cream. Up to 4 marks for a diagram: • axes correctly labelled – price and quantity or P and Q (1) • demand and supply curves correctly labelled, S (1) • demand curve D1 shifted to the right D2 (1) • correct equilibriums identified either by lines drawn to both axes or equilibrium prices clearly identified e.g. E1 and E2 (1) 1 mark for written analysis: • an increase in income increases purchasing power (1) • people buy more ice cream when they have more money/income (1) • demand will increase as ice cream is a luxury good • price will rise 5 price of ice cream quantity of ice cream O P2 D1 D1 P1 Q1 Q2 D2 D2 S S Question Answer Marks Guidance 1(d) Analyse the extent to which the relationship shown in Table 1 between countries’ GDP per head and their HDI value is the expected one. Generally, in the same order / positively related / countries with highest GDP per head have the highest HDI (1) countries with high incomes generally spend more on education and healthcare (1) supporting evidence e.g. Argentina has highest GDP per head and highest HDI (1). Egypt higher in terms of GDP per head but lower in terms of HDI than Cuba (1). Cuba may have a high life expectancy (1) indicating good healthcare (1). Cuba may have a high number of mean and expected years of schooling (1) indicating a strong education system / more educated population (1). 4 Reward 1 mark for a supported conclusion that it is generally the expected relationship. Marks may be gained in relation to Cuba by mentioning Egypt may have less good healthcare and education. 1(e) Discuss whether or not a government should encourage people to save more. Up to 3 marks for why it should: More savings can fund investment / enable people to set up a business (1) higher investment can increase economic growth (1) higher economic growth can increase living standards (1). A government may make use of money in government-run saving schemes (1) e.g. to fund infrastructure projects (1). More savings can reduce consumer spending (1) which will lower total (aggregate) demand (1) which can reduce inflation (1). More savings can reduce demand for imports (1) improve the current account position (1). More savings can help people cope with emergencies / increase wealth / for future use (1) prepare for retirement (1) in case of unemployment (1) spend on education (1) reduce need for government expenditure e.g. pensions/education (1) enabling the government to spend on other named area (1). Up to 3 marks for why it should not: More saving may reduce output / cause recession (1) increase unemployment (1) cause deflation (1). More saving will increase deposits at banks (1) this may encourage them to lend to un- creditworthy customers (1) causing banks to collapse (1). 5 Accept response from the perspective of why it should not, by discussing why it would be better for the government to encourage spending, Reward change in consumer spending and total demand in either why it should, or why it should not, but not in both. Question Answer Marks Guidance 1(f) Explain, using information from the extract, how cash benefits given to the poor can reduce poverty. May enable them to send their children to school for longer (1) this may increase their children’s skills (1) qualifications (1) increase their job opportunities / start a business (1) increase their earning potential / living standards (1) enable them to purchase more goods and services (1) including basic necessities (1). 4 Maximum of 1 mark for a way cash benefits may reduce poverty, if not linked to education. Reward but do not expect reference to an implied multiplier effect resulting from the higher spending creating more jobs. 1(g) Discuss whether or not a market system benefits consumers. Up to 4 marks for why it might: In theory there will be consumer sovereignty (1) with firms being responsive to consumer demand (1). The price mechanism allocates resources automatically / profit motive provides an incentive to respond to consumer demand (1) avoiding delays in responding to changes in demand (1). There may be a high level of competition (1) keeping price low (1) increasing efficiency (1) keeping quality high (1) providing choice (1). Up to 4 marks for why it might not: Those with low incomes will lack purchasing power (1) the market will not produce what they want (1). Monopolies may develop (1) driving up price (1) reducing quality (1). Consumers may not always be fully informed (1) e.g. cigarettes (harmful / demerit goods) may be overconsumed (1) e.g. healthcare (beneficial / merit goods) under consumed (1) there may be external costs (1) market failure may occur (1). Some consumers may find too much choice confusing (1) advertising can distort consumer choice (1). 6 Reward but do not expect reference to public goods.
This question in 0455/22 May/June 2018
Q4 · The global water crisis In 2015, the World Economic Forum identified the water crisis as… 0455/23 May/June 2018
1 The global water crisis In 2015, the World Economic Forum identified the water crisis as the world’s biggest risk. Across many Asian and African nations the water supply was at critically low levels, insufficient to meet the rising demand. Demand has risen because of the expansion of cities and population growth requiring much more agricultural production. Water scarcity is a problem shared by many developing countries which have a low life expectancy. A third of all their healthcare facilities are estimated to lack access to safe water and basic sanitation. Water shortages harm public health – 80% of all illnesses in developing countries are caused by poor water and sanitation conditions. Water shortages also restrict the amount of food production. Table 1 shows the risk of water shortage (highest risk is 5) and Gross Domestic Product (GDP) per head measured in US$. Table 1 Risk of water shortage and GDP per head for countries / regions in 2015 Country / region Risk of Water Shortage GDP per head (highest risk = 5) (US$) Algeria 3.4 4 318 Canada 1.2 43 332 Germany 1.9 40 997 Pakistan 4.3 1 450 Saudi Arabia 5.0 20 813 Western Sahara 5.0 2 500 The shortage of water has led various countries and regions to experiment with privatising their supply. However, because water is a necessity, private supply has in some cases resulted in consumers suffering from significant price increases. A 10% increase in the price of water is estimated to result in only a 0.7% decrease in quantity demanded. This means that governments have to regulate water markets to protect consumers. Some economists argue that consistent undervaluing of water has led to it being used inefficiently. This is because prices fail to take into account the long-run consequences of not conserving this valuable resource. With much of the world facing a hotter and drier future as a result of climate change, water will become increasingly scarce. More than 663 million people are estimated to live without access to clean water. The World Bank funds a range of projects designed to tackle this and in doing so reduce levels of absolute poverty. Improving access to natural resources is seen as essential in promoting economic development in some of the world’s poorest nations. (a) Identify, using information from the extract, two causes of low life expectancy in developing countries. [2] (b) (i) Explain, using information from the extract, how the water shortage is an example of the economic problem. [4] (ii) Explain, using information from the extract, why the problem of water shortages is likely to become even worse in the future. [4] (c) Analyse, using Table 1, the extent to which a high risk of water shortage in a country/region causes low GDP per head. [5] (d) Calculate, using the information in the extract, the price elasticity of demand for water. [2] (e) Discuss whether or not private firms supplying water should increase their prices. [5] (f) Explain what is meant by absolute poverty. [2] (g) Discuss whether or not a country’s economic growth rate depends mostly on the availability of its natural resources. [6]
30 marks
Mark scheme: 1(a) Identify, using information from the extract, two causes of low life expectancy in developing countries. • Poor healthcare facilities • lack of access to safe water • lack of basic sanitation • not enough food production • absolute poverty 2 1(b)(i) Explain, using information from the extract, how the water shortage is an example of the economic problem. The economic problem consists of the allocation of scarce resources amongst competing ends (1). Water supply is at critically low levels (1) showing resources are scarce / limited (1). Rising demand from growth of cities (1) and rising agricultural production (1) wants are unlimited (1). 4 1(b)(ii) Explain, using information from the extract, why the problem of water shortages is likely to become even worse in the future. Water is being undervalued (1) this has led to it being wasted (1) and the prices do not reflect scarcity that will arise in the future (1) this means that as demand continues to rise (1) the gap between wants and the amount of the resource will increase (1). Climate change (1) will cause water supplies to become increasingly scarce (1). Population will continue to rise / cities will expand (1) increasing demand (1) and exceeding the ability of supply to match demand (1). 4 Question Answer Mark Guidance 1(c) Analyse, using Table 1, the extent to which a high risk of water shortage in a country / region causes low GDP per head. The data indicates a link (1) the greater the degree of water scarcity (i.e. the higher the water risk score) the lower the GDP per capita. (1) Canada / Germany have the lowest water risk scores and the highest GDP per capita (1). Pakistan / Western Sahara have high water risk scores and low GDP per capita (1). Saudi Arabia illustrates that this relationship is not perfect (1) and demonstrates that other factors contribute towards GDP per capita (1) 5 1(d) Calculate, using the information in the extract, the price elasticity of demand for water. PED = (–) 0.07 (2) Correct working –0.7% / 10% or –0.07% or 0.7 (1) 2 Question Answer Mark Guidance 1(e) Discuss whether or not private firms supplying water should increase their prices. Up to 3 marks for why they should: An increase in price will increase total revenue (1) as demand is price inelastic (1) meaning an increase in price causes a less than proportional decrease in quantity demanded (1) some of the extra funds could be used to increase the supply of water (1) reducing its shortage (1) and improve the quality of water (1). Higher prices may reduce demand (1) helping to eliminate the shortage / achieve market equilibrium (1). As population is increasing (1) rising prices are needed to ration extra demand (1). Current prices do not take account of the long run costs of failing to conserve supplies (1) higher prices will encourage more efficient use of water / less waste (1). Up to 3 marks for why they should not: Water is a necessity / has very inelastic demand (1) raising prices will harm consumers (1) and will fall more heavily on the poor / the poor will be unable to afford water (1) increase absolute poverty (1) increase inequality (1). Higher water prices can reduce health (1) reduce life expectancy (1) as less people will have access to safe water / basic sanitation (1). Higher water prices reduce income available to spend on other necessities e.g. education (1). 5 1(f) Explain what is meant by absolute poverty. Individuals cannot afford the necessities essential for survival (1) such as food, water, shelter, warmth and clothing (1) individuals living on less than a certain amount per day, e.g. $1. 2 Question Answer Mark Guidance 1(g) Discuss whether or not a country’s economic growth rate depends mostly on the availability of its natural resources. Up to 4 marks for why they might: Natural resources are an important factor of production (1) Countries endowed with natural resources have a good productive capacity as a result (1), boosting the growth that they can enjoy (1). A lack of natural resources such as water can cause poverty / ill health (1). This can harm productivity (1). Countries with insufficient natural resources are reliant on other countries to provide them (1) worsening the current account and reducing the economic growth rate (1) and if a country does not have enough other resources to trade it must rely upon its own natural resources (1). Natural resources are important in agriculture (1) countries with a lack of natural resources may not produce enough food (1) leading to poorer nutrition (1) poorer health and lower productivity (1). Natural resources are essential for the construction of infrastructure e.g. roads and schools (1) Other economic sectors (secondary and tertiary) depend upon natural resources (primary) (1). Up to 4 marks for why they might not: Other factors of production are equally / more important e.g. capital investment or education for skills (1). Through trade (1) a country can obtain from other countries the natural resources it lacks (1) It depends upon what countries specialise in (1) and whether they face trade restrictions (1) if they can import raw materials from other countries their growth will not be limited (1). Finding natural resources can take a long time (1) slowing down economic growth (1). There are many countries in the world with significant natural resources but poor economic growth rates / standard of living (1) and many countries with limited resources but high growth rates, such as Singapore (1). 6
This question in 0455/23 May/June 2018
Q5 · The state of California has the most progressive tax system in the USA 0455/23 May/June 2018
5 The state of California has the most progressive tax system in the USA. The tax system helps reduce high poverty rates. Policy makers are considering reforming sales tax in the state to include services, while reducing the use of direct taxes. (a) Define progressive tax. [2] (b) Explain two reasons why a government may want to reduce poverty. [4] (c) Analyse, using a supply and demand diagram, the effect of increasing a sales tax. [6] (d) Discuss whether a government should increase indirect taxes and whether it should reduce direct taxes. [8]
20 marks
Mark scheme: 5(a) Define progressive tax. A tax that takes a higher percentage of income of the rich / lower percentage of income of the poor (2). Falls more heavily on the rich / imposes a higher burden on the rich (1). A tax which is used to reduce income inequality (1). 2 5(b) Explain two reasons why a government may want to reduce poverty. Reduce income inequality (1) raise living standards (1). To increase tax revenue (1) as average incomes / GDP will rise (1). To improve the country’s HDI / develop the country (1). Reduce healthcare expenditure (1) as the poor will be fitter (1). Increase labour productivity (1) leading to more output / lower unemployment (1). 4 Question Answer Mark Guidance 5(c) Analyse, using a supply and demand diagram, the effect of increasing a sales tax. Award up to 4 marks for a correct diagram: • Axes labels P and Q (1) • Supply and demand curves correctly labelled (1) • Supply curve shifting left (1) • Original and new equilibrium positions identified (1) Award up to 2 marks for associated explanation: Increasing tax raises a firm’s costs of production (1). A higher price (1) may be passed on to consumers (1). 6 price quantity O S2 S1 p2 p1 D1 q2 q1 Question Answer Mark Guidance 5(d) Discuss whether a government should increase indirect taxes and whether it should reduce direct taxes. Up to 5 marks for why the government should do this: Incentives to work may increase (1) if low income then the extra income from work (1) could reduce poverty (1) if high income then the individuals could work harder (1) generating economic growth (1). Raising indirect taxes on goods with external costs (demerit goods) e.g. cigarettes (1) can help to reduce market failure (1) e.g. health of the country improves (1). Up to 5 marks for why the government shouldn’t do this: Indirect taxes tend to be regressive (1) whilst direct taxes are progressive (1) so this will worsen inequality / poverty in a country (1). Both policies may lead to inflation (1) indirect tax increases push up prices of goods and services (1) direct tax cuts increase total (aggregate) demand (1). Individuals may save any cuts in direct tax (1) minimising the economic impact (1). It could cause individuals to spend more on imports (1) worsening the balance of payments (1). Tax take could fall (1) as indirect taxes can be avoided whereas direct taxes cannot (1). 8
This question in 0455/23 May/June 2018
Q6 · The Malaysian government implemented the Vision 2020 policy which aims to make Malaysia a… 0455/21 Oct/Nov 2018
4 The Malaysian government implemented the Vision 2020 policy which aims to make Malaysia a developed country by the year 2020. Along with this vision, the National Privatisation Policy was also implemented whereby various firms, such as those involved in telecommunications, were privatised. Poverty has significantly reduced since the implementation of these policy measures. (a) Identify the difference between absolute poverty and relative poverty. [2] (b) Explain two characteristics of a developed country. [4] (c) Analyse two policy measures to alleviate poverty. [6] (d) Discuss whether or not moving firms from the public sector to the private sector will benefit an economy. [8]
20 marks
Mark scheme: 4(a) Identify the difference between absolute and relative poverty. Relative poverty is where people have fewer goods and services / income than others in an economy / lower income than the average in the country (1). Absolute poverty is where people are unable to meet basic needs e.g. food and shelter / living on e.g. less than US $1.25 a day / a given % of a country’s average income (1). 2 4(b) Explain two characteristics of a developed country. High incomes / high GDP per capita / high standard of living / high HDI (1) due to high production of goods and services (1). High life expectancy / low death rate / low infant mortality (1) due to e.g. good healthcare, better nutrition, low crime rates (1). High school enrolment / standard of education (1) due to high spending on education (1). Low level of absolute poverty / malnutrition / starvation (1) due to high incomes / fairer distribution of income (1). Low rate of population growth (1) due to e.g. availability of contraception, social attitudes, women working for longer, less need for children to work (1). Low primary / large secondary / tertiary sectors (1) value of output is greater in the secondary/tertiary sector (1). 4 Question Answer Marks Guidance 4(c) Analyse two policy measures to alleviate poverty. Increasing benefits (1) increasing the incomes of the poor (1) e.g. housing benefits, disability benefits, unemployment benefits (1). Increased provision of merit goods such as healthcare (1) and education / improved literacy (1) improving the ability to earn an income through employment (1). Government employment creation schemes (1) creating new jobs and employing more people in the government (1) government providing help to search for employment (1) Encouraging economic growth (1) through fiscal or monetary policies (1) decreasing interest rates (1) increasing government spending (1). Provision of subsidies (1) example (1) keeping down the cost of living (1) leaving more for other essential items (1). Progressive taxation (1) to redistribute income towards the poor (1). The introduction of minimum wage legislation (1) so that everyone can at least afford basic necessities such as food and shelter (1). 6 Max 4 marks for analysis of only one policy measure. Question Answer Marks Guidance 4(d) Discuss whether or not moving firms from the public sector to the private sector will benefit an economy. Up to 5 marks for positive effects: Private sector firms have the profit motive (1) and so the efficiency (1) and quality of their output may be good (1) and so may enable them to pay higher wages (1). The threat of closing down (1) will force firms to provide a good service to stay in business (1). Competition between private firms (1) leads to better response to consumer demand (1) keeping costs (1) and prices low (1). Private firms are accountable to shareholders (1) who want high dividends (1) therefore firms need to be efficient/profitable (1). Investment in the private sector will not be disrupted by fluctuations in government tax revenue (1). May attract financial investment from abroad (1). Up to 5 marks for negative effects: Investment funds may be more available to the public sector than the private sector (1) to provide a quality service (1). A public sector firm can be prevented from going of business (1) guaranteeing the provision of certain products e.g. water (1) maintaining employment (1) Public sector firms are not always motivated by profit (1) the government is more likely to base its decisions on social/external costs and benefits (1) e.g. the environment (1) rather than just private costs and benefits (1). Public sector firms may provide essential services (1) which the private sector is not willing to provide (1) will be more inclined to keep prices low (1) the poor will be able to afford essential products (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. Accept responses from the opposite perspective i.e. positive effects of the public sector and negative effects of the private sector.
This question in 0455/21 Oct/Nov 2018
Q7 · Nigeria adopts a floating exchange rate In June 2016, Nigeria adopted a floating exchange… 0455/23 Oct/Nov 2018
1 Nigeria adopts a floating exchange rate In June 2016, Nigeria adopted a floating exchange rate after the country’s central bank had spent months trying to maintain its fixed exchange rate. It had used foreign currency reserves to buy its currency, imposed tariffs and limited the amount of foreign currency that Nigerians could purchase. Most economists thought that the value of Nigeria’s currency would depreciate. A lower value of the Nigerian naira might help increase output and reduce the deficit on the current account of the country’s balance of payments. In 2015, Nigeria experienced a deficit on its current account for the first time in 20 years. Countries with a current account deficit often have a higher inflation rate and a lower economic growth rate than those with a current account surplus. Fig. 1 shows the inflation rate, economic growth rate and the current account balance of selected countries in 2015. Fig. 1 The inflation rate, economic growth rate and current account balance of selected countries in 2015 China Colombia Germany Nigeria Turkey -8 -6 -4 -2 0 2 4 6 8 10 Inflation rate Economic growth rate Current account balance (% of GDP) A current account deficit can lower the exchange rate and so may increase import prices. A higher price of imports, including imported food, can accelerate inflation. In 2015, as well as experiencing a current account deficit, tax revenue fell in Nigeria and was lower than government expenditure. Some economists predicted that the government would cut spending on education and healthcare in 2016 to reduce the gap between tax revenue and government spending. The Nigerian government has been trying to reduce poverty in the country. In 2015, more than 60% of the population were living in poverty. Among the causes of the high level of absolute poverty was an unemployment rate of 9.5%. One policy measure proposed to reduce poverty in Nigeria is for the government to raise the wages of low-paid workers. The government also wants to diversify the economy because the oil industry accounts for almost 90% of the country’s export earnings. The oil industry pays high wages to some of its workers and relatively high interest rate payments to local banks. It also creates water pollution and air pollution. (a) Identify, from the extract, two methods of trade protection. [2] (b) Analyse what may cause a depreciation in an exchange rate. [5] (c) Analyse to what extent the information in Fig. 1 suggests that countries with current account deficits have higher inflation rates and lower economic growth rates than those with current account surpluses. [4] (d) Explain, using information from the extract, two reasons why poverty may have increased in Nigeria in 2015–16. [4] (e) Discuss whether or not a cut in government spending on education would reduce the gap between government spending and tax revenue. [5] (f) Explain, using information from the extract, two external costs that arise from oil production in Nigeria. [4] (g) Discuss whether or not an increase in the wages of low-paid workers will reduce poverty. [6]
30 marks
Mark scheme: 1(a) Identify, from the extract, two methods of trade protection. Tariffs (1) Exchange control/limit on foreign currency that people can buy (1). 2 1(b) Analyse what may cause a depreciation in an exchange rate. A deficit on the balance of payments on current account (1) imports are greater than exports resulting in fall in market price (1). A fall in demand for the currency (1) a rise in the supply of the currency (1). A fall in exports/rise in imports (1) due to higher inflation (1) lower quality of goods being produced (1) higher costs of production (1). A rise in imports/fall in exports (1) due to increase in demand in the economy/economic growth (1). A fall in the rate of interest (1) due to a fall in FDI/speculation (1). An expansionary government monetary policy (1) to sell currency to encourage exports (1). 5 1(c) Analyse to what extent the information in Table 1 suggests that countries with current account deficits have higher inflation rates and lower economic growth rates than those with current account surpluses. The three countries with current account deficits do have higher inflation rates (1). Correct identification of Columbia/Nigeria/Turkey as the three countries with a deficit (1). China and Germany have lower inflation (1). The picture is less certain in terms of economic growth (1). Evidence (up to 2) e.g. Columbia has a deficit but relatively high economic growth (1). Germany had a surplus but low economic growth (1). 4 Question Answer Marks Guidance 1(d) Explain, using information from the extract, two reasons why poverty may have increased in Nigeria in 2015–2016. Higher price of imported food (1) the poor spend a high proportion of their income on food (1). Current account deficit (1) results in lower demand and unemployment rises (1). Inflation (1) people can afford less (1). Spending on education and health care may have been cut (1) this may have reduced some people’s ability to access this services/reduced employment in these sectors/unable to get jobs due to lack of skills/illness (1). Unemployment may have increased/high unemployment (1) reducing some people’s income (1). Lower tax revenue (1) spending on welfare benefits may have fallen (1). Water pollution (1) clean drinking water is seen as a necessity (1). 4 Question Answer Marks Guidance 1(e) Discuss whether or not a cut in government spending on education would reduce the gap between government spending and tax revenue. Up to 3 marks for why it might: Spending on education may form a relatively high percentage of government spending/a reduction will reduce overall government spending (1) this could have big impact on gap if government does not raise spending on other items (1) if tax revenue remains unchanged (1). The government may have used the tax revenue to spend on stimulating the economy (1) raising tax revenue (1). Up to 3 marks for why it might not: Lower government spending on education may reduce skills (1) lowering employment (1) reducing incomes (1) lowering tax revenue (1) increasing government spending on benefits (1) gap may widen (1). Government may increase spending elsewhere e.g. infrastructure (1) therefore gap is not reduced (1). May encourage emigration (1) fewer people to pay taxes (1). 5 For all ‘Discuss’ questions 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. Generic example Mark Tax revenue may decrease 1 because of reason« e.g. incomes may be lower 1 Tax revenue may increase (reverse of 1st argument) 0 because of a different reason / not a reverse argument e.g. government spending on subsidies may stimulate the economy more than spending on education. 1 1(f) Explain, using information from the extract, two external costs that arise from oil production in Nigeria. Water pollution (1) imposing a cost on fishermen/poor quality drinking water affects health of local people/cost on third parties/government may have to spend money clearing up the pollution (1). Air pollution (1) imposing a cost on local people e.g. quality of air affects breathing/damage to the environment/global warming (1). 4 Question Answer Marks Guidance 1(g) Discuss whether or not an increase in the wages of low-paid workers will reduce poverty. Up to 4 marks for why it might: One cause of poverty is low pay (1) raising the pay of the poor can take them out of poverty/increase their income (1) their spending is likely to increase (1) enabling them to buy more basic necessities (1) reducing absolute poverty (1) stimulating higher output/demand (1) reducing unemployment (1). Enables low-income families to spend on education of children (1) raising skills and pay in long-run (1). Raising the pay of low-paid workers may increase their motivation (1) which may increase their productivity (1) increasing their chances of keeping their jobs/gaining promotion (1). Up to 4 marks for why it might not: Increase may be very small (1) insufficient to take people out of poverty (1) Increase maybe less than inflation rate (1) leaves poor worse off (1). Poor may not have jobs (1) increase in pay has no affect for them (1). The rise in pay (1) may increase firms’ costs of production (1) causing them to make some workers redundant (1) reducing their income (1). 6 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 0455/23 Oct/Nov 2018
Q8 · Average life expectancy is as short for the poorest Americans as it is for the people of… 0455/22 Feb/March 2019
4 Average life expectancy is as short for the poorest Americans as it is for the people of Sudan, a low-income African country. Low-income individuals tend to live longest in countries with more educated populations. Economic growth can increase education and reduce poverty. In 2017, the US President announced a cut in the tax on firms’ profits. He said the measure would increase employment. (a) Identify two reasons why someone may want to migrate to the USA. [2] (b) Explain two reasons why less-educated people tend to have a shorter life expectancy than people who have received more education. [4] (c) Analyse how economic growth can reduce absolute poverty. [6] (d) Discuss whether or not a cut in the tax on firms’ profits will increase employment. [8]
20 marks
Mark scheme: 4(a) Identify two reasons why someone may want to migrate to the USA. 2 • higher wages • better education • better healthcare • better employment prospects 4(b) Explain two reasons why less-educated people tend to have a shorter 4 life expectancy than people who have received more education. • a lower income (1) worse nutrition/healthcare/housing (1) • less well-informed (1) less likely to eat healthily / more likely to have unhealthy habits e.g. smoking (1) • more likely to be in a more physically demanding / risky job (1) less choice of occupation due to less skills/qualifications (1). 4(c) Analyse how economic growth can reduce absolute poverty. 6 Economic growth is likely to increase employment (1) this may increase the chances of the poor gaining jobs (1) raise income (1) allow them to buy basic necessities / definition of absolute poverty (1). Economic growth can increase tax revenue (1) this may enable the government to spend more to help the poor (1) e.g. improved education for the poor (1) higher state benefits (1). 4(d) Discuss whether or not a cut in the tax on firms’ profits will increase 8 employment. Up to 5 marks for why it might: Firms will be able to keep more of their profits (1) this may increase the incentive for them to expand their output (1) it will provide the funds to spend on expansion (1). To increase their output, firms may take on more workers (1) employment may rise in the private sector (1). Higher profits may attract more shareholders (1) this will also increase the funds for investment (1). Up to 5 marks for why it might not: Firms will not expand if they have spare capacity (1) or they are worried about the future (1). Firms may distribute extra profits to shareholders rather than invest (1). Firms may expand by adopting more capital-intensive methods (1) may actually reduce employment (1). May be lower tax revenue (1) example of what the government may spend less on (1) link to unemployment (1).
This question in 0455/22 Feb/March 2019
Q9 · Universal basic income (UBI) UBI is a scheme where a government provides everyone with a… 0455/21 May/June 2019
1 Universal basic income (UBI) UBI is a scheme where a government provides everyone with a payment, regardless of their circumstances. Such a scheme can help a number of groups including the sick and the old. In 2016, the Indian government was looking at a UBI as an alternative to its existing system of state benefits. A politician in Costa Rica proposed a UBI of $337.5. Finland started a two-year experiment with a version of UBI in 2017. A guaranteed minimum income might help some of the poor who currently do not receive state benefits and may reduce inequality. In a number of countries, income and wealth inequality is increasing. For instance, in Russia 16% of the population live below the official poverty line and 10% of the population own 87% of the country’s wealth. State benefits are relatively low in Russia and the country has one income tax rate of 13%. One cause of the rise in the gap between the rich and the poor in Russia has been the effect on prices and profits arising from the privatisation of a number of state monopolies. Differences in annual average incomes (annual GDP per head) between countries can affect life expectancy as shown in Table 1.1. Table 1.1 Annual GDP per head and life expectancy in selected countries in 2016 Country Annual GDP per head Life expectancy (US$) (years) Costa Rica 16 200 78.8 Finland 42 000 80.8 India 7 400 68.6 Mali 2 300 55.7 Monaco 76 000 89.5 Russia 26 200 70.4 In Finland, a country with an average monthly income per head of $3500, the trial UBI is $600 per month. This does not cover everyone’s needs in a country with high prices, high tax rates and periods of very cold weather. In India, the average monthly income per head is almost the same as Finland’s UBI. A UBI could help the unemployed including the temporary unemployed. Governments welcome a reduction in unemployment. This is because it increases output and enables governments to reduce spending on state benefits for the unemployed. Governments could then increase spending on other areas including education and healthcare. (a) Identify, using information from the extract, two reasons why a person may have a low income. [2] (b) Explain, using information from the extract, whether Russia has a progressive, proportional, or regressive income tax system. [2] (c) Calculate, using Table 1.1, what percentage of annual average income in Costa Rica a person would have if he receives UBI of $337.5 a month. [2] (d) Analyse, using Table 1.1, the relationship between annual GDP per head and life expectancy. [5] (e) Explain an example of opportunity cost in the extract. [4] (f) Discuss whether or not a monopoly will charge high prices. [5] (g) Explain, using information from the extract, two reasons why someone from India with the same income as someone from Finland may enjoy a higher living standard. [4] (h) Discuss whether or not a government paying higher state benefits to the unemployed will reduce unemployment. [6]
30 marks
Mark scheme: 1(a) Identify, using information from the extract, two reasons why a person may have a low income. • old • sick • unemployed • being on state benefits • being in need of, but not receiving state benefits in their country 2 Difference between fourth and fifth bullet point is where a country is not able to fund state benefits, so people remain on low income. 1(b) Explain, using information from the extract, whether Russia has a progressive, proportional or regressive income tax system. Proportional (1) AND the same rate / people with different incomes paying the same % / all paying 13% (1). 2 1(c) Calculate, using Table 1, what percentage of annual average income in Costa Rica, a person would have if he receives UBI of $337.5 a month. 25% (2). Correct working: $337.5 × 12 / $16 200 (1). 2 1(d) Analyse, using Table 1, the relationship between annual GDP per head and life expectancy. Generally, the higher the annual GDP per head, the longer the life expectancy (1) e.g. rich people are likely to have better nutrition / healthcare (1). The two countries, Monaco and Finland, with the highest annual GDP per head have the longest life expectancy (1). The country with the lowest annual GDP per head, Mali, has the lowest life expectancy (1). Russia or Costa Rica is an exception (1) e.g. Costa Rica has a lower annual GDP per head but a higher life expectancy than Russia (1). 5 Countries must be named. Question Answer Marks Guidance 1(e) Explain an example of opportunity cost in the extract. • Opportunity cost is the best alternative (1) foregone (1) plus • The opportunity cost of UBI (1) is the existing system of state benefits (1) or • The opportunity cost of spending on unemployment benefits (1) is spending on education / healthcare (1) 4 1(f) Discuss whether or not a monopoly will charge high prices. Up to 3 marks for why it might: A monopoly is a single seller (1) has high market power (1) is a price maker (1) demand for its product may be inelastic (1) due to lack of substitutes (1) can raise revenue by raising price (1) may be seeking to maximise profit (1). A monopoly may be inefficient (1) due to lack of competition (1) resulting in higher costs and prices (1). Up to 3 marks for why it might not: A monopoly may have low average cost of production (1) due to economies of scale (1) example (1). A monopoly may not be a profit maximiser (1) example of another objective (1). A monopoly may have a product with elastic demand (1) e.g. may be producing a luxury (1). A monopoly may be concerned that charging high prices will encourage new firms to enter the market (1) reducing its market power (1). A monopoly may fear government intervention (1) and keep prices low (1). A monopoly may be government controlled (1) and charge low prices (1). 5 Reward but do not expect reference to price discrimination resulting in low prices for some consumers. Question Answer Marks Guidance 1(g) Explain, using information from the extract, two reasons why someone from India with the same income as someone from Finland may enjoy a higher living standard. Lower prices in India (1) an Indian household may have greater purchasing power / be able to buy more goods and services (1) Colder weather in Finland (1) which is likely to increase people’s willingness to spend / greater need to spend to keep warm (1) Lower tax rates in India (1) greater purchasing power / higher disposable incomes (1) 4 Opposite arguments are also correct e.g. higher tax rates in Finland, etc. Question Answer Marks Guidance 1(h) Discuss whether or not a government paying higher state benefits to the unemployed will reduce unemployment. Up to 4 marks for why it might: The unemployed will have a higher income (1) they may spend more (1) total (aggregate) demand may increase (1) firms may expand (1) take on more workers (1). Enables the unemployed to spend on education and training (1) and improve their chances of getting a job (1). Up to 4 marks for why it might not: Unemployment benefit may become higher than the wages the low paid may receive (1) this may encourage some people to stop working (1) increase voluntary unemployment (1). Higher state benefits may be financed by increased taxation (1) total (aggregate) demand may not rise (1). Government spending money on education and training (1) may have greater impact on reducing unemployment (1). 6 Apply this example to all questions with the command word DISCUSS (1(f), 1(h), 2(d), 3(d), 4(d), 5(d), 6(d) and 7(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 to be rewarded. Generic Example Marks Tax revenue may decrease« (one mark) 1 ...because of reason e.g. incomes may be lower (one mark) 1 Tax revenue may increase because incomes may be higher i.e. reverse of 1st argument (no marks) 0 «because of a different reason that is not the reverse of a previous argument e.g. government spending on subsidies may stimulate the economy more than spending on education 1
This question in 0455/21 May/June 2019
Q10 · Moldova is Europe’s poorest economy with many of its people living in poverty 0455/22 May/June 2019
5 Moldova is Europe’s poorest economy with many of its people living in poverty. It is mainly an agricultural economy with many small farms. Its shops are also small. The government has used a range of policies, including supply-side policy, to improve the economy’s performance. It has mostly been successful. For instance, unemployment has fallen. (a) Identify two supply-side policy measures. [2] (b) Explain two ways a government could reduce relative poverty. [4] (c) Analyse the reasons why small shops may be easy to set up. [6] (d) Discuss whether or not firms will benefit from a fall in unemployment. [8]
20 marks
Mark scheme: 5(a) Identify two supply-side policy measures. • a cut in income tax • a cut in corporation tax • a cut in unemployment benefit • education • training • privatisation • deregulation • subsidy • legislation to reduce trade union power 2 e.g. lower indirect taxes and reduced interest rate. 5(b) Explain two ways a government could reduce relative poverty. • progressive taxation / higher direct taxes (1) which takes a higher proportion of the income of the rich (1) • reduction of tax on basic foodstuffs / indirect taxes (1) benefiting mainly the poor (1) • state benefits given to the poor (1) increasing their purchasing power / living standards (1) • education and training of the poor (1) increasing their earning potential (1) • provision of healthcare to the poor (1) increasing productivity/reducing cost of medication (1) • provision of subsidies to firms (1) reducing unemployment / reducing prices (1) 4 Reward but do not expect reference to minimum wage and price controls. Question Answer Marks Guidance 5(c) Analyse the reasons why small shops may be easy to set up. They do not take much money to set up (1) costs initially will be low (1) low fixed costs (1) it may be possible to borrow the money (1) or use savings (1). There may be government subsidies (1) designed to encourage the growth of small firms/shops / lower costs of production (1). Running a small shop does not require significant management skills (1) people do not need a high level of education to run a small shop (1). May be less paperwork involved / regulations (1) reducing time and effort (1). 6 Question Answer Marks Guidance 5(d) Discuss whether or not firms will benefit from a fall in unemployment. Up to 5 marks for why they might: A fall in unemployment will increase incomes (1) this is likely to increase total (aggregate) demand (1) firms may sell more products (1) raise firms’ profits (1). Having more workers will enable firms to increase their output (1) can respond to rising demand (1). Lower unemployment may increase consumer confidence (1) encouraging them to spend more (1). Tax revenue will rise (1) spending on unemployment benefit will fall (1) government may spend more in ways that will benefit firms (1) e.g. spending on training (1). Up to 5 marks for why they might not: Firms may find it more difficult to recruit workers (1) they may not able to fill some jobs (1) this may mean that output will be restricted/order not filled (1). Competition for workers may drive up wages (1) increasing firms costs (1) lowering their profits (1). Trade unions may become more powerful (1) leading to more strikes (1). Less skilled workers may be employed (1) reducing productivity (1) raising costs (1). Shortage of workers may force firms to use more capital-intensive production methods (1) increasing their costs (in the short run) (1). Some firms may lose whilst others gain (1) example of a reason e.g. differences in what is being produced (1). 8
This question in 0455/22 May/June 2019
Q11 · Germany’s economy is one of the best performing economies in the European Union (EU) 0455/23 May/June 2019
2 Germany’s economy is one of the best performing economies in the European Union (EU). Germany has low unemployment rates and a surplus on the current account of the balance of payments. Single parents, long-term unemployed, immigrants, elderly, and low-skilled workers have not always benefitted from Germany’s economic performance. This has created increasing levels of relative poverty. (a) Define a surplus on the current account of the balance of payments. [2] (b) Explain two possible causes of low unemployment. [4] (c) Analyse how long-term unemployment can cause relative poverty. [6] (d) Discuss whether or not an increase in a surplus on the current account of the balance of payments decreases unemployment. [8]
20 marks
Mark scheme: 2(a) Define a surplus on the current account of the balance of payments. When the revenue from trade in goods and trade in services exported exceeds the revenue from trade in goods and trade in services imported (2). When the inflow from primary income and secondary income is higher than the outflow of primary income and secondary income (2). Exports greater than imports (1). 2 2(b) Explain two possible causes of low unemployment. high levels of economic growth/GDP (1) output requires more workers (1) high levels of education and training (1) acquire skills needed for jobs (1) high levels of investment (1) high demand for workers (1) high levels of consumer spending (1) more production / more labour (1) high levels of exports (1) increasing demand for labour high government spending / low taxes (1) to stimulate economic growth (1) low interest rates (1) encouraging more consumption / investment (1) 4 2(c) Analyse how long-term unemployment can cause relative poverty. Relative poverty is when household income is low compared to the average (median) income in that country, e.g. less than 60% of average income (1) Long-term unemployed have very low incomes (1) cannot afford items which average households are able to (1) e.g. adequate housing, healthcare (1) may depend on government benefits (1) may be unable to provide children with good education (1) children may not be able to take up good jobs (1) productivity may be lower (1) compared to those who are better educated (1). Savings will be used up (1) reducing the ability to escape poverty (1) Health deteriorates (1) reducing the ability to find work (1) depression may occur (1) reducing the motivation to find work (1) 6 Question Answer Marks Guidance 2(d) Discuss whether or not an increase in a surplus on the current account of the balance of payments decreases unemployment. Up to 5 marks why it may: More exports (1) means more output is needed (1) more workers will be needed (1) as demand for labour is a derived demand (1). A surplus means more funds flowing into the economy (1) increasing total (aggregate) demand (1) which could generate jobs (1) Incomes increase (1) consumption may increase (1) increasing revenue of firms (1) which could then be reinvested (1) Up to 5 marks why it may not: Exports may be capital-intensive (1) using less labour to produce exports (1). A surplus in one country may create a deficit in another (1) other countries may not be able to continue buying exports (1) other countries may impose protectionist policies (1) to prevent future deficits (1). An increase in a surplus may raise the exchange rate (1) reducing net exports (1) increasing unemployment (1). 8
This question in 0455/23 May/June 2019
Q12 · A new capital for Zambia? 0455/23 Oct/Nov 2019
1 A new capital for Zambia? Zambia is a middle-income country but one with 60% of its population of 15 million living below the poverty line. In 2017, the Zambian government announced that it was planning to move the country’s capital from Lusaka in the south of the country to Ngabwe, a village in the centre of the country. Ngabwe currently lacks good roads and other infrastructure. A move to Ngabwe, however, may help the country to cope with its high rate of population growth and encourage entrepreneurs to set up new businesses in that area. In 2017, the country had a zero net migration rate, a birth rate of 41.8, a death rate of 12.4, and a life expectancy of 52.5 years. Zambia’s economic growth rate averaged 6.8% between 2004 and 2014. This rate fell after 2014 due, in part, to a depreciation in the kwacha, Zambia’s currency. The reduction in the foreign exchange rate of the kwacha contributed to the rise in the country’s inflation rate from 10.1% in 2015 to 20.6% in 2016. In 2017, the labour force of 7.2 million accounted for 48% of the country’s population. Workers are employed in a range of industries including agriculture, banking, building, copper mining, and emerald mining. Fig. 1.1 shows the relationship between copper output and revenue from the sale of copper, the index for 2010 is 100. 140 130 120 110 index 100 90 80 70 60 2010 2011 2012 2013 2014 2015 2016 2017 Copper output Revenue from the sale of copper Fig. 1.1 Copper output and revenue from the sale of copper 2010—17 (index numbers) In 2017, Zambia’s central bank reduced commercial bank lending. This lowered investment and household borrowing. Government spending rose more slowly and some cuts were made to the government’s spending on training. (a) Identify, from the extract, two primary sector industries. [2] (b) Calculate, using information from the extract, how many people in Zambia lived in poverty in 2017. [2] (c) Explain, using information from the extract, why Zambia had a high rate of population growth in 2017. [2] (d) Explain, using information from the extract, why a depreciation of the kwacha harmed the Zambian economy. [4] (e) Analyse, using Fig. 1.1, the relationship between copper output and revenue from the sale of copper. [5] (f) Discuss whether or not a central bank should reduce commercial bank lending. [5] (g) Explain, using information from the extract, two reasons why productivity may have been low in Zambia. [4] (h) Discuss whether or not building a new city will benefit an economy. [6]
30 marks
Mark scheme: 1(a) Identify, from the extract, two primary sector industries. • agriculture • copper mining • emerald mining 2 1(b) Calculate, using information from the extract, how many people in Zambia lived in poverty in 2017. • 9m (2). • Correct working: 15 m × 60% (1). 2 1(c) Explain, using information from the extract, why Zambia had a high rate of population growth in 2017. • Birth rate exceed death rate / more people being born than dying (2). • High birth rate / high natural increase (1). • Birth rate 41.8 and death rate 12.4 (1). 2 1(d) Explain, using information from the extract, why a depreciation of the kwacha harmed the Zambian economy. • Inflation rate rose (1) from 10.1% in 2015 to 20.6% in 2016 (1). • Growth rate fell (1) from 6.8% after 2014 (1). • Depreciation is a fall in the value of the currency (1) import prices would have been higher (1) increasing costs of production (1) leads to higher prices (1) demand for higher wages (1) creating a wage-price spiral (1). • Higher inflation may have reduced international competitiveness (1) reducing output / economic growth rate (1) leading to lower employment (1) and reduction in living standards (1). 4 Question Answer Marks Guidance 1(e) Analyse, using Fig.1.1, the relationship between copper output and revenue from the sale of copper. Expected relationship - a direct relationship would have been expected / moved in same direction / as copper output rose, revenue should have risen (1). Evidence in support of unexpected relationship • Does not support expected relationship / shows an inverse relationship (1). • Between 2010–14 revenue rose (from 100 to 128) but output fell (from 100 to 90) so prices rose (1). • Between 2014–17 revenue fell (from128 to 90) but output rose (from 90 to 108) which meant that prices fell (1). • In 2014 copper revenue was highest 128 and output at its lowest 90, while in 2017 copper revenue was at its lowest 90 and output at its highest 108, so changes in revenue were greater than changes in output of copper (1). Analysis of inverse relationship: • When output fell, price per unit may have risen more than fall in output, due to loss of economies of scale causing average costs to rise (1). • Price for Zambian copper affected by world market prices (1). • Copper is likely to be inelastic in demand so prices rise by more than fall in output increasing revenue (1). 5 A pattern of analysis is expected in response to this type of question. Do not reward simple statements (repetition) of the figures given in the table. Question Answer Marks Guidance 1(f) Discuss whether or not a central bank should reduce commercial bank lending. Up to 3 marks for why it should: • Lowering consumer expenditure / investment by firms (1) may reduce demand-pull inflation (1) making exports more competitive (1). • May prevent households and firms getting into debt (1) that they cannot repay banks (1) may avoid a financial crisis in the future (1). • May reduce spending on imports (1) improve the current account position (1). Up to 3 marks for why it should not: • It may reduce consumer expenditure (1) investment (1) this will lower total (aggregate) demand (1) which may reduce economic growth (1). • Some firms may go out of business (1) causing unemployment (1) results in poverty (1). • Firms may not keep up with advances in technology (1) reduce international competitiveness (1) harm the current account position (1). • Households may not be able to borrow to pay for their everyday living / their children’s education / their higher education (1) lower their career prospects (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 Question Answer Marks Guidance 1(g) Explain, using information from the extract, two reasons why productivity may have been low in Zambia. • Low investment (1) e.g. fewer workers might be working with new advanced capital equipment (1). • Cut in the government spending on training (1) workers may be less skilled (1). • People living in poverty / poor health (1) more time off work (1). • Lack of infrastructure e.g. lack of roads / lack of school buildings (1) means greater difficulty getting to work / gaining adequate education (1). • Only 48% of the population work (1) less people in work (1). • Life expectancy of only 52.5 years (1) lack of skills / experience (1). 4 1(h) Discuss whether or not building a new city will benefit an economy. Up to 4 marks for why it might: • Jobs will be created (1) reduce unemployment (1) higher total demand / economic growth (1) creating higher income / less poverty (1). • Better housing may be constructed (1) overcrowding may be reduced / less homelessness (1) living standards may rise (1). • MNCs may be attracted into the country (1) by improved facilities (1). • Results in higher tax revenue (1) which government can spend on other objectives e.g. education and health (1). Up to 4 marks for why it might not: • It will involve an opportunity cost (1) money spent/resources used could have been used to e.g. improve education and healthcare (1) may cause a budget deficit (1). • It may cause external costs (1) e.g. damage the environment (1). • People and firms may not want to move (1) new facilities will be wasted (1). • Causes inflation (1) if already at or close to full employment (1). • Pushes up prices (1) causing cost-push inflation (1). • Depletes natural resources / raw materials (1) more dependent on imports (1). 6
This question in 0455/23 Oct/Nov 2019
Q13 · Japan has a low immigration rate and a declining population 0455/21 May/June 2020
2 Japan has a low immigration rate and a declining population. In recent years, it has experienced deflation and a rise in child poverty. By 2017, one in six Japanese children lived in a household with less than half of the average household income. Japan operates a national minimum wage which increased every year between 2010 and 2017. This may have affected the level of poverty in the country. (a) State two benefits a country may gain from immigration. [2] (b) Explain two consequences of deflation. [4] (c) Analyse why children from low-income families may have low incomes as adults. [6] (d) Discuss whether or not a national minimum wage will reduce poverty. [8]
20 marks
Mark scheme: 2(a) State two benefits a country may gain from immigration. 2 One mark each for two from: larger labour force, reduced dependency rate, higher demand, higher tax revenue, more skilled workers, greater utilisation of resources. 2(b) Explain two consequences of deflation. 4 Logical explanation which might include: Output may fall (1) if due to lower demand firms will cut back production (1). Unemployment may rise (1) fewer workers will be needed to produce fewer goods and services (1). Economic growth may decline / a recession may occur (1) due to lower total (aggregate) demand (1). Output may rise (1) if due to lower costs of production / advances in technology (1). Exports may increase (1) if domestic products have become more price- competitive (1). 2(c) Analyse why children from low-income families may have low incomes 6 as adults. Coherent analysis which might include: Likely to receive less education (1) likely to have lower quality healthcare (1) nutrition is likely to be poor (1) likely to gain fewer qualifications/skills (1) be less productive (1) have fewer employment opportunities (1) may be in low paid jobs (1) may be unemployed (1). 2(d) Discuss whether or not a national minimum wage will reduce poverty. 8 In assessing each answer, use the table below. 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: • is set above the equilibrium level, will raise the pay of the low-paid • may reduce relative poverty by reducing the gap between high and low- income earners • may reduce absolute poverty by enabling low paid workers greater access to basic necessities • may raise employment, if it motivates workers and raises productivity • may raise employment if it increases total (aggregate) demand. Why it might not: • may not have any impact if set below the equilibrium level • unemployment may rise as it may increase firms’ costs of production • will not help the poor who are unable to work • may not reduce relative poverty if it results in other workers pressing for, and getting, wage rises to maintain their wage differentials • some receiving it may not be in poor households. Reward, but do not expect, a national minimum wage diagram which shows the effect on pay and employment.
This question in 0455/21 May/June 2020
Q14 · Calculate Pakistan’s trade in goods balance in 2017 0455/22 May/June 2020
1 (a) Calculate Pakistan’s trade in goods balance in 2017. [1] (b) Identify two possible causes of demand-pull inflation in Pakistan in 2017. [2] (c) Explain the opportunity cost to Pakistan of producing consumer goods. [2] (d) Explain two reasons why education is a merit good. [4] (e) Analyse why the children of poor families tend to receive less education than the children of rich families. [4] (f) Analyse the relationship between GDP per head and imports per head. [5] (g) Discuss whether or not the supply of teachers in Pakistan is likely to increase in the future. [6] (h) Discuss whether or not an increase in its import tariffs would be likely to benefit the Pakistani economy. [6]
30 marks
Mark scheme: Question Answer Marks 1(a) Calculate Pakistan’s trade in goods balance in 2017. 1 –$36.5bn (1). 1(b) Identify two possible causes of demand-pull inflation in Pakistan in 2 2017. Any two from: Higher government spending (1) higher consumer spending / rising population (1) increased investment (1). 1(c) Explain the opportunity cost to Pakistan of producing consumer 2 goods. Logical explanation which might include: Capital goods (1) resources that could have been used to produce capital goods are being used to produce consumer goods / (next) best alternative forgone (1). 1(d) Explain two reasons why education is a merit good. 4 Logical explanation which might include: People underestimate full benefit / private benefit (1) not appreciating health and job opportunity benefits (1). People not taking into account external benefits (1) e.g. better quality products/larger quantity of products or economic growth (1). 1(e) Analyse why the children of poor families tend to receive less 4 education than the children of rich families. Coherent analysis which might include: The children of the poor may not attend school (1) they may have to work (1) to help support their families (1). Poor families are likely to have difficulty paying to have their children educated (1) some schools in Pakistan are in the private sector (1) there seems to be a lack of low-cost schools (1). The children of the poor may leave school at a younger age (1) may miss more school days due to ill health (1). 1(f) Analyse the relationship between GDP per head and imports per head. 5 Coherent analysis which might include: Generally the countries with the highest GDP per head spend the most per head on imports (1) examples e.g. Norway has the highest income per head and the highest spending on imports per head and Haiti has the lowest income and the lowest spending on imports (up to 2) exception: Russia has a higher income per head than Mexico but a lower spending per head on imports (1). Expected relationship as income rises (1) people can afford more imports (1). The four countries with above average GDP per head spend above the global average on imports (1). The two countries with below average GDP per head spend more on imports (1). 1(g) Discuss whether or not the supply of teachers in Pakistan is likely to 6 increase in the future. 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. Award up to 4 marks for logical reasons why it might, which may include: • education standards may rise (1) which may increase those qualified to be teachers (1) • working conditions may improve (1) with better buildings (1) • population is increasing (1) which may increase the size of the labour force (1). Award up to 4 marks for logical reasons why it might not, which may include: • wages may not rise (1) teachers may switch to other jobs (1) • teachers may emigrate to other countries (1) • the qualifications required to be a teacher may increase (1) by more than educational standards rise (1). 1(h) Discuss whether or not an increase in its import tariffs would be likely 6 to benefit the Pakistani economy. Award up to 4 marks for logical reasons why it might, which may include: • may reduce the trade deficit (1) by reducing demand for imports (1) • tax revenue may increase (1) enabling the government to increase its spending (1) • may help protect infant industries (1) until they can take advantage of economies of scale (1). Award up to 4 marks for logical reasons why it might not, which may include: • demand for some finished imports may be price inelastic (1) • demand for capital goods / raw materials may be inelastic (1) • incomes may rise (1), leading to higher spending on imports (1) • other countries may impose trade restrictions (1) reducing Pakistan’s ability to export (1).
This question in 0455/22 May/June 2020
Q15 · Free trade has allowed the Mexican economy to specialise in low-cost manufacturing 0455/21 Oct/Nov 2020
5 Free trade has allowed the Mexican economy to specialise in low-cost manufacturing. Unemployment nationally is relatively low, but approximately 50 million people were still considered to be in poverty in 2016. In addition, there are worries that technological advances will soon replace labour with capital. (a) State the rewards for labour and capital. [2] (b) Explain the two types of poverty. [4] (c) Analyse how firms can benefit from specialisation. [6] (d) Discuss whether or not supply-side policy measures can reduce unemployment. [8]
20 marks
Mark scheme: 5(a) State the rewards for labour and capital. Wages (1) for labour Interest (1) for capital 2 5(b) Explain the two types of poverty. Logical explanation which might include: Absolute poverty (1) is when someone cannot afford the basic necessities of life (1) less than $1.90 per day at PPP (1). Relative poverty (1) is when someone earns less than is needed to participate in the normal activities of society (1) when there is inequality (1). 4 One mark for identifying absolute poverty and one mark for an explanation. One mark for identifying relative poverty and one mark for an explanation. 5(c) Analyse how firms can benefit from specialisation. Coherent analysis which might include: Improve skills of workers (1) save time (1) lead to invention of new technology (1) increase productivity (1) raise quality (1) decrease average cost of production (1) decrease prices (1) increase demand (1) enable advantage to be taken of economies of scale (1) increase profits (1). 6 Question Answer Marks Guidance 5(d) Discuss whether or not supply-side policy measures can reduce unemployment. In assessing each answer, use the table opposite. Why they can: • decrease corporation / profit tax, more profits, more investments, more demand for labour, reduction in cyclical unemployment • decrease interest rates, more borrowing, more investment, more demand for labour, reduction in cyclical unemployment • decrease income tax, increase disposable income, more spending / demand for goods and services, more production, increase demand for labour • government subsidies can encourage firms to expand and take on more workers, reduce cyclical unemployment • increase spending on education and training, increase skills / productivity of labour, increase demand for labour, decrease structural unemployment. • provide more information on jobs / job centres, easier for workers to find jobs, decrease frictional unemployment • reduce unemployment benefit to reduce the time workers are between jobs, decrease frictional unemployment. Why they cannot: • may be a time lag • more investments could lead to increased technological development, less demand for workers • education programmes not according to market needs 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) • privatisation could lead to firms cutting amount of workers • decrease in minimum wage could decrease incentive to work • may be a lack of total demand. Example of L2 answer: Supply-side measures such as training and education can help to reduce unemployment as they allow people to become more skilled and therefore increase their opportunities to become hired. Also, when a firm is subsidised by the government, it may have more money to invest in labour, and this would reduce unemployment. Privatisation can also cause a reduction in unemployment, as the private sector may be willing to invest more capital to labour to increase its output and this would reduce unemployment. On the other hand, supply-side measures may not reduce unemployment, because subsidies given to firms may increase its capital, but this may be used to become more capital-intensive rather than labour-intensive, which would not reduce unemployment. Also, if people are trained and educated, but gain skills that are not demanded, they may remain unemployed and therefore unemployment would not decrease. Privatisation may lead to firms becoming more capital-intensive rather than labour-intensive, and this would not reduce unemployment. Principal Examiner comment: Reasonable on both sides.
This question in 0455/21 Oct/Nov 2020
Q16 · In 2018, the US had its lowest unemployment rate for 18 years 0455/21 May/June 2021
3 In 2018, the US had its lowest unemployment rate for 18 years. Cyclical unemployment was very low and so was the rate of inflation. The US also experienced a rise in labour productivity. However, it did not do so well in reducing poverty. In 2018, approximately 12% of Americans were living in poverty. (a) Define cyclical unemployment. [2] (b) Explain two ways a firm could increase the productivity of its workers. [4] (c) Analyse the advantages of a low rate of inflation. [6] (d) Discuss whether or not a fall in a country’s unemployment rate will reduce poverty in that country. [8]
20 marks
Mark scheme: 3(a) Define cyclical unemployment. • Workers without jobs (1) • due to a lack or fall in total (aggregate) demand (1) • more people unemployed than there are job vacancies (1) • in a recession / economic downturn (1). 2 Nothing for a fall in demand for a product. 3(b) Explain two ways a firm could increase the productivity of its workers. Logical explanation which might include: • Raise wages / performance related pay / commissions (1) increase motivation of workers (1). • Provide training (1) increase workers’ skills / efficiency (1). • Division of labour by firm (1) enables greater specialisation (1) • Buy capital goods / invest (1) workers will be working with better equipment (1). • Reduce working hours (1) workers may feel fresher / more alert (1). • Improve working conditions (1) reduce stress (1). • Subsidise workers’ healthcare (1) making them fitter / fewer days lost through illness (1). • Working from home (1) reduce stress from travelling (1). 4 One mark each for each of two ways identified and one mark each for each of two explanations. Question Answer Marks Guidance 3(c) Analyse the advantages of a low rate of inflation. Coherent analysis which might include: • Low inflation means prices are still rising (1) but not a high rate (1). • May stop purchasing power being reduced too much / wages may keep pace with inflation (1). • May increase international price competitiveness (1) as may be below the inflation rate of other countries (1) increasing exports (1) reducing imports (1) improving the current account position (1). • May create greater certainty / stability (1) as costs may not be rising significantly (1) encouraging firms / MNCs to invest (1) increasing output / GDP (1) increasing employment / lowering unemployment (1). • May encourage saving (1) as real value may be maintained (1) provide funds for investment (1). • It may raise profit (1) if demand-pull (1) encouraging firms to expand (1) increasing employment / lowering unemployment (1). • May stop a random redistribution of income (1) protecting savers (1). • Low menu costs (1) reduce pressure on firms’ costs of production (1). 6 ‘Increasing employment / lowering unemployment’ can only be credited once. Question Answer Marks Guidance 3(d) Discuss whether or not a fall in a country’s unemployment rate will reduce poverty in that country. In assessing each answer, use the table opposite. Why it might: • increase the income of those who gain jobs • absolute poverty may be reduced with more people being able to buy basic necessities • tax revenue may rise • the government could spend more on benefits for the poor • the government could spend more on education, reducing future poverty Why it might not: • jobs may be part-time, low-paid, at national minimum wage • jobs may be seasonal • relative poverty may increase if extra jobs are gained by the well-paid • the unemployment rate may fall but unemployment may rise if there are more people in the labour force • may be more retired people living in poverty • sick and disabled people may not be able to get out of poverty • unemployment is only one of a number of factors affecting poverty • absolute poverty may remain 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 3(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 2021
Q17 · Nearly one million people in Cairo, the capital city of Egypt, live in crowded, unhealthy… 0455/22 May/June 2021
2 Nearly one million people in Cairo, the capital city of Egypt, live in crowded, unhealthy housing. One reason why people lack basic necessities, including adequate housing, is unemployment. In 2019, nearly 10% of Cairo’s workers did not have a job. Other citizens of Cairo live in luxury, in houses costing more than $1 million. Many of Cairo’s rich adults grew up in rich families. (a) Identify two basic necessities, other than housing. [2] (b) Explain how frictional unemployment differs from cyclical unemployment. [4] (c) Analyse why the children of the rich tend to become rich adults. [6] (d) Discuss whether a government should provide subsidies to families to spend on housing. [8]
20 marks
Mark scheme: 2(a) Identify two basic necessities, other than housing. Two from e.g.: Food, water, clothing, healthcare and education. 2 Accept any relevant basic necessity e.g. heating or electricty. If more than two examples given, only consider the first three. 2(b) Explain how frictional unemployment differs from cyclical unemployment. Logical explanation which might include: Frictional unemployment arises from people being in between jobs (1) may be waiting for a better paid job / may be seasonally unemployed / may have worked on a short-term contract / may lack information about vacancies (1) may exist even when there is full employment / may be self-correcting (1). Cyclical unemployment is caused by a lack of total (aggregate) demand (1) more people unemployed than there are job vacancies (1) may arise from a recession / economic downturn (1) may need government action to reduce it (1). Frictional unemployment would be reduced by a rise in labour mobility (1) cyclical unemployment would not be (1). Frictional unemployment may be short term (1) cyclical unemployment may be long term (1). 4 Up to 2 marks for each type of unemployment. Question Answer Marks Guidance 2(c) Analyse why the children of the rich tend to become rich adults. Coherent analysis which might include: The children of the rich tend to receive a good education (1) may not have to take part-time jobs / not have to help in family business when studying / not have to leave school early (1) become well qualified / well educated / gain high level of knowledge (1) become highly skilled / productive / efficient (1) find it is relatively easy to find employment / get a good job (1) well-paid (1). The children of the rich tend to receive good health care (1) good nutrition (1) have good housing (1) unlikely to miss time at school (1) unlikely to miss time at work (1) income will be high (1). The children of the rich tend to have high expectations (1) apply for better jobs (1). The children of the rich may inherit e.g. property (1) may gain income from e.g. inherited property / business / savings (1). Rich parents may have connections with e.g. bosses of major employers (1) more likely to gain high paid work (1). 6 Note the focus here is on the children of the rich so no marks for e.g. the children of the poor may lack education. Reference to highly skilled / productive or efficient may be linked to education, healthcare or nutrition but can only be credited once. Question Answer Marks Guidance 2(d) Discuss whether a government should provide subsidies to families to spend on housing. In assessing each answer, use the table opposite. Why it might: • will increase the spending power of families who receive it • may increase quantity supplied • may give low-income families access to a basic necessity, reducing poverty • may enable families to spend more on e.g. education • may increase employment / reduce unemployment, creating jobs building housing / increase labour mobility • may increase quality of housing and so improve health Why it might not: • rich can already afford housing • some families may not spend it on housing • may be inflationary, demand increasing for housing and e.g. furniture, carpets • opportunity cost • taxes may be raised to finance subsidy • building more houses may result in environmental damage 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 u sing 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 May/June 2021
Q18 · Calculate, in $s, the contribution of the fishing industry to Morocco’s GDP in 2017 0455/23 May/June 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
Q19 · Calculate the number of obese people in the UK in 2016 0455/23 Oct/Nov 2021
1 (a) Calculate the number of obese people in the UK in 2016. [1] (b) Identify two reasons why the demand for vegan food has increased in the UK. [2] (c) Explain one external benefit that may arise from eating less meat. [2] (d) Explain how food consumption in Senegal differed from the US in 2015. [4] (e) Analyse how an increase in labour mobility could improve the performance of a country’s trade in goods. [4] (f) Analyse how an increase in meat consumption could benefit African economies. [5] (g) Discuss whether or not an increase in Senegalese government spending will stop the country experiencing a recession. [6] (h) Discuss whether or not emigration would reduce poverty in Senegal. [6]
30 marks
Mark scheme: 1(a) Calculate the number of obese people in the UK in 2016. 18.2 million/18 200 000/18.2 × 106 1 Accept 18 million. 1(b) Identify two reasons why the demand for vegan food has increased in the UK. Two from: • (concerns about) health • (concerns about) obesity • (compassion for) animal welfare • rise in income/getting richer/higher standard of living • advertising of vegan products • less consumption of meat 2 One mark each for each of two reasons. 1(c) Explain one external benefit that may arise from eating less meat. Healthy/less obese people (1) are more productive/higher output/live longer/government can spend more on education and raise skills (1). Improved environment/air/water quality (1) less greenhouse gases/pollution/people sick (1). 2 One mark for the external benefit identified and one mark for the explanation. Question Answer Marks Guidance 1(d) Explain how food consumption in Senegal differed from the US in 2015. Senegalese citizens consumed fewer calories (1) consumed less than the recommended amount/US consumed more than the recommended amount (1). Senegalese may have suffered malnourishment (1) US may have suffered from obesity (1). Senegalese had a healthier diet (1) e.g. more fruit and vegetables (1). A higher proportion of the Senegalese diet consisted of cereals/grains (1) because it was cheap (1). Senegalese citizens consumed less meat (1) because it was expensive/low incomes (1). Senegalese citizens consumed less sugar and/or sweeteners (1). Senegalese consumed a higher proportion of fruit and/or vegetables (1). Senegalese consumed less added fats and/or oils (1). 4 Accept a response from the viewpoint of the US e.g. US citizens ate more meat. Question Answer Marks Guidance 1(e) Analyse how an increase in labour mobility could improve the performance of a country’s trade in goods. Coherent analysis which might include: Labour markets will become more efficient (1) workers become more skilled (1) workers will move more easily between industries/become more occupationally mobile/respond quickly to changes in demand (1). Workers can move more easily from one place to another/become more geographically mobile (1). If demand for a product rises (1) it will be easier to recruit new workers/fill vacancies (1) more can be produced/supplied (1) less need for imports (1) import expenditure could fall (1) more can be exported (1) export revenue could rise (1). 4 Question Answer Marks Guidance 1(f) Analyse how an increase in meat consumption could benefit African economies. Coherent analysis which might include: May reduce malnutrition/make people healthier (1) make workers more productive/efficient (1) improve quantity/quality of output (1) lower costs of production (1) more competitive internationally (1) exports increase/imports reduce (1) economic growth (1). Increase demand for vets and transport firms (1) increase number of meat processing firms (1) greater investment by firms (1) will increase output (1) raise employment (1) raise incomes/standard of living (1). Reduces government spending on health care (1) can spend more on education/unemployment benefits/infrastructure increasing skill levels/productivity (1). 5 Question Answer Marks Guidance 1(g) Discuss whether or not an increase in Senegalese government spending will stop the country experiencing a recession. Award 1 mark for explanation of recession. Award up to 4 marks for logical reasons for why it might, which might include: • Government spending part of total (aggregate) demand (1) may increase total (aggregate) demand (1) may offset fall in consumer expenditure (1) this may encourage firms to produce more/attract new firms to set up (1) employ more staff/lower (cyclical) unemployment (1) earn more income (1) purchase more goods and services (1). • Government spending on education/training/healthcare infrastructure (1) improves productivity (1) make products more internationally competitive (1) increasing total (aggregate) demand (1) raising output (1). • Government subsidies (1) will lower costs of production (1) encouraging firms to produce more (1). Award up to 4 marks for logical reasons for why it might not, which might include: • May not be great enough to offset fall in investment (1) business confidence may be low (1). firms may not increase output after being given government subsidies (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 Mar k 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) • Consumer expenditure may fall (1) investment may not rise (1) exports may fall (1) • if consumer confidence is low (1). • May be global recession (1) exports may fall (1). • If taxes are raised to pay for the increase in government spending (1) government borrows (1) effect on total (aggregate) demand may be small (1). Higher spending on education/health/infrastructure may not result in increased workforce/greater productivity (1). Question Answer Marks Guidance 1(h) Discuss whether or not emigration would reduce poverty in Senegal. Award up to 4 marks for logical reasons for why it might, which might include: • Workers’ remittances may increase/emigrants may send money home to Senegal (1) working abroad may enable them to provide more financial support for their families (1) than working at home (1) if wages are higher abroad (1) • Unemployment may fall (1) if potential emigrants could not gain work at home (1) • Increase ability of people to gain skills/work experience (1) increasing their ability to earn more (1) can share those skills with workers when they return to Senegal (1) • Emigration may move the country towards the optimum population (1) if the country lacks resources (1) this could increase income per head (1) increasing ability to purchase basic necessities (1) Award up to 4 marks for logical reasons for why it might not, which might include: • Skilled workers may leave the country (1) reducing output (1) discouraging MNCs (1) reducing jobs (1) reducing income (1) • There will be fewer people to pay taxes (1) lower tax revenue available to spend to reduce poverty (1) e.g. on education (1) • May be more dependents on the government (1) if parents leave children and elderly relatives behind (1) • Fewer workers in the population (1) will make it harder to finance state pensions (1) may reduce income of pensioners (1) 6
This question in 0455/23 Oct/Nov 2021
Q20 · New Zealand is a small country with a population of 5 million 0455/22 Feb/March 2022
3 New Zealand is a small country with a population of 5 million. Most New Zealand firms are relatively small and most do not experience diseconomies of scale. In 1894, New Zealand was the first country to introduce a national minimum wage. New Zealand experienced a rise in income per head every year between 2010 and 2019. During this period, 6% of New Zealand’s households experienced absolute poverty. (a) Define diseconomies of scale. [2] (b) Explain two reasons why a high-income household may borrow more than a low-income household. [4] (c) Analyse, using a diagram, the effect of an increase in output on average fixed cost (AFC) and total fixed cost (TFC). [6] (d) Discuss whether or not the introduction of a national minimum wage will reduce poverty. [8]
20 marks
Mark scheme: 3(a) Define diseconomies of scale. Higher average costs of production (1) as a result of a larger scale of production / growing too large / internal diseconomies of scale affect a firm whereas external diseconomies of scale affect an industry (1). 2 3(b) Explain two reasons why a high-income household may borrow more than a low-income household. Logical explanation which might include: Banks may be more willing to lend to them (1) more confident of being repaid (1). Banks may charge a low interest rate (1) as a high-income household may borrow a larger amount (1). High-income households may be more confident of being able to repay the loan / able to repay the loan quickly (1) may expect income to rise / have greater job security (1). High-income households may have significant wealth / assets (1) able to offer collateral (1). High-income households may borrow for a big-ticket items/luxuries (1) e.g. to buy an expensive house, expensive car, to pay for children’s education / to increase/maintain status / living standards (1). 4 One mark for each of two reasons identified and one mark for each explanation. Note: the focus here is on households not firms. Nothing for just high-income households spend more. Question Answer Marks Guidance 3(c) Analyse, using a diagram, the effect of an increase in output on average fixed cost (AFC) and total fixed cost (TFC). Up to 4 marks for the diagram: Axes correctly labelled: costs and output (1) TFC horizontal line (1). AFC downward sloping (1). Curves correctly labelled: TFC / FC and AFC (1). Up to 2 marks for coherent written analysis which might include: A higher output will have no effect on total fixed cost / fixed costs do not change with output in the short run / fixed costs have to be paid even when output is zero (1). Average fixed cost will fall with output / as the same cost figure is divided by a higher output / AFC is TFC divided by output (1). 6 Do not reward a demand/supply/demand and supply or PPC diagram. Question Answer Marks Guidance 3(d) Discuss whether or not the introduction of a national minimum wage will reduce poverty. In assessing each answer, use the table opposite. Why it might: • low-paid workers may be better paid • higher income may enable people to buy basic necessities • reduce absolute poverty • pay gap between high-income and low-income workers may be reduced, lower relative poverty • higher pay may increase spending, creating more jobs and income • higher tax revenue may enable the government to spend more on reducing poverty • higher wages may increase productivity which could encourage firms to hire more workers. Why it might not: • may be set below current low pay and so have no effect • may result in some workers losing their jobs • unemployed will have lower income • may discourage MNCs operating in the country • does not help people who are poor because of age, unemployment or sickness • may result in inflation, leaving purchasing power/real wages unchanged. 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 3(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 2022
Q21 · Uganda specialises in agricultural products and has a relatively small secondary sector 0455/21 May/June 2022
4 Uganda specialises in agricultural products and has a relatively small secondary sector. In the 1990s, the Ugandan government privatised most of its firms, including banks and railways. Some economists thought this privatisation was unsuccessful because poverty increased and unemployment remained high. In recent years, the Ugandan government has used supply-side policy measures to reduce unemployment. (a) Define privatisation. [2] (b) Explain the difference between absolute poverty and relative poverty. [4] (c) Analyse how specialisation can benefit firms. [6] (d) Discuss whether or not the use of supply-side policy measures will reduce unemployment. [8]
20 marks
Mark scheme: 4(d) Explain the difference between absolute and relative poverty. Logical explanation which might include: Absolute poverty is a lack of basic necessities (1) e.g., food, clothing or housing / e.g. $1.90 a day (1). Relative poverty is being poor in comparison to other people (in their country) (1) example of a measure such as less than 60 of average income / not able to participate fully in normal activities in their country (1). their basic needs but not their wants. 4(d) Analyse how specialisation can benefit firms. Coherent analysis which might include: Understanding of specialisation of a firm / workers become skilled at producing a particular product (1) lower cost of production (1) gain a good reputation / high quality of good or service (1) increase demand (1) increase output (1) raise revenue (1) increase profit (1). May enable firms to gain advantage of economies of scale (1) example (1) become (internationally) competitive (1). Easier to mechanise / improve technology (1) speeds up / faster production / become more efficient (1). 6 Maximum of one mark for any number of examples of economies of scale. Note that some students only write about division of labour which is not the question but some of the features also apply to specialisation of firms.
This question in 0455/21 May/June 2022
Q22 · The South Korean government thinks that Japan is dumping steel 0455/22 May/June 2022
4 The South Korean government thinks that Japan is dumping steel. South Korean firms trade with, and produce in, other countries. Some South Korean multinational companies (MNCs) claim to reduce poverty in their host countries. In 2019, South Korean firms were affected by a depreciation in South Korea’s foreign exchange rate. Some firms also experienced a shortage of workers, which was influenced by the country’s very low birth rate. (a) Define dumping. [2] (b) Explain two reasons why a country’s foreign exchange rate may depreciate. [4] (c) Analyse how a MNC could reduce poverty in a host country. [6] (d) Discuss whether or not a very low birth rate would be a cause for concern for a government. [8]
20 marks
Mark scheme: 4(a) Define dumping. The sale of a product at less than cost price (1) in a foreign country (1) to gain a larger market share (1) to get rid of surplus stock / to prevent price falling on the domestic market (1). 2 Accept the sale of a product at a low price. 4(b) Explain two reasons why a country’s foreign exchange rate may depreciate. Logical explanation which might include: Inflation / fall in productivity (1) may make domestic products less internationally competitive / reducing net exports / reducing exports / increasing imports (1). Income at home may rise (1) increasing demand for imports / diverting products from the home market (1). Incomes abroad may have fallen (1) reducing demand for exports (1). The rate of interest may have fallen (1) discouraging an inflow of funds from other countries / encouraging an outflow of funds to other countries (1). There may be speculation that the currency will fall in value (1) selling the currency before it falls in value (1) Inward foreign direct investment may fall / outward fdi may increase (1) due to changes in economic activity (1). A central bank/government may sell the currency (1) to increase exports / reduce imports / improve the balance of payments (1). Increase in supply of currency (could be shown by a diagram) (1). Decrease in demand for the currency (could be shown on a diagram) (1). 4 One mark for each of two reasons identified and one mark for each explanation. A common response may be an increase in the supply of the currency (1) to buy more imports (1); A decrease in demand for the currency (1) if less exports are sold (1). Total = 4. Question Answer Marks Guidance 4(c) Analyse how a MNC could reduce poverty in a host country. Coherent analysis which might include: A MNC could increase employment / create job opportunities (1) some of the unemployed could gain jobs / unemployment could fall (1). It may pay higher wages / incomes may rise (1) increasing workers’ ability to buy products / buy basic necessities (1). It may provide accommodation (1) and healthcare for workers (1). It may provide infrastructure (1) making e.g. transport/energy more affordable (1). It may provide training / invest in education (1) enabling people to earn higher wages in the long run (1). It may sell products at a cheaper price (1) enabling more goods and services to be purchased (1). It may pay taxes to the government / tax revenue may rise (1) enabling the government to spend on measures to reduce poverty (1). 6 Question Answer Marks Guidance 4(d) Discuss whether or not a very low birth rate would be a cause for concern for a government. In assessing each answer, use the table opposite. Why it might: may create an ageing population may reduce size of the labour force in the future may increase dependency ratio may reduce tax revenue may take population below the optimum level. Why it might not: may maintain the size of the labour force in the short run as parents do not have to leave the labour force may reduce overcrowding may reduce pollution may reduce depletion of non-renewable resources. 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. 68 Question Answer Marks Guidance 4(d) 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. 35 1 There is a simple attempt at using economic definitions and terminology. Some reference may be made to economic theory, with occasional understanding. 12 0 A mark of zero should be awarded for no creditable content. 0
This question in 0455/22 May/June 2022
Q23 · In 2019, Russia had an unemployment rate of 4.6% 0455/22 Oct/Nov 2022
3 In 2019, Russia had an unemployment rate of 4.6%. Russia experienced full employment in the past. Its government wants unemployment to be lower. In 2018, the Russian government cut its spending which may have increased poverty. In both 2018 and 2019, the government did not change its income tax rate. Russia operates a proportional tax rate system. (a) Define full employment. [2] (b) Explain the difference between a proportional income tax system and a progressive income tax system. [4] (c) Analyse why a cut in government spending might increase poverty. [6] (d) Discuss whether or not a fall in a country’s unemployment rate always benefits workers. [8]
20 marks
Mark scheme: 3(a) Define full employment. 2 One mark for idea of full employment of resources e.g. all workers in employment. The lowest unemployment possible (very low percentage) / job vacancies matching the number unemployed (2). Low unemployment (1). May still be some workers in between jobs / some frictional unemployment (1). Zero unemployment (1). 3(b) Explain the difference between a proportional income 4 Three marks maximum for proportional income tax system tax system and a progressive income tax system. and three marks maximum for progressive income tax system. Logical explanation which might include: Proportional income tax system takes the same percentage / proportion of income (1) from all income groups (1). In a proportional income tax rate system, the tax rate does not change (1) as income changes (1) has no effect on the distribution of income (1). Progressive income tax system takes a larger percentage / smaller percentage (1) of the income of the rich / the poor / places a larger burden on the rich (1) helps redistribute income from the rich to the poor / reduces the gap between rich and poor / may be used to promote equity (1). In a progressive income tax rate system, the tax rate increases (1) as income increases (1). 3(c) Analyse why a cut in government spending might 6 increase poverty. Coherent analysis which might include: A cut in government spending might reduce total demand (1) increasing unemployment (1) reducing incomes (1). Government spending on subsidies to firms might be reduced (1) which may raise prices (1). Government spending on education might be reduced (1) this might cause a decrease in skills (1) reducing wages (1) may lead to vicious cycle of poverty (1). Government spending on healthcare might be reduced (1) lowering productivity and wages (1). Government spending on state / unemployment benefits might be reduced (1) reducing goods and services that can be bought (1). Government spending on state pensions might be reduced (1) the old may not be able to buy basic necessities (1). 3(d) Discuss whether or not a fall in a country’s 8 Level Description Marks unemployment rate always benefits workers. 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 be: economic information and clear and • increase choice of jobs logical analysis to evaluate economic • increase wages issues and situations. One side of the argument may have more depth than • raise living standards the other, but overall both sided of the • increase job security argument are considered and • competition for workers may raise working conditions developed. There is thoughtful • more may be spent on training. evaluation of economic concepts, terminology, information and/or data Why it might not be: appropriate to the question. The • may be result of workers leaving the labour force e.g. discussion may also point out the emigrating possible uncertainties of alternative • may not benefit all workers as some may still be decisions and outcomes. unemployed • may not be high quality jobs 2 A reasoned discussion which makes 3–5 • may be low-paid jobs use of economic information and clear • may be temporary jobs analysis to evaluate economic issues and situations. The answer may lack • may cause inflation reducing real wages. 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 0455/22 Oct/Nov 2022
Q24 · Romania’s indirect tax rate was 19% between 2017 and 2019 0455/23 Oct/Nov 2022
3 Romania’s indirect tax rate was 19% between 2017 and 2019. There is a high proportion of foreign multinational companies (MNCs), especially US MNCs, in Romania. MNCs have helped to increase productivity in Romania and lower its unemployment rate. There are also benefits of MNCs to their home countries. (a) Define, with an example, an indirect tax. [2] (b) Explain two benefits of MNCs to their home countries. [4] (c) Analyse how an increase in productivity can affect unemployment. [6] (d) Discuss whether or not a decrease in a country’s unemployment rate will reduce poverty. [8]
20 marks
Mark scheme: 3(a) Define, with an example, an indirect tax. 2 Allow an example of a product that is taxed for the example mark e.g. motor cars. A tax on goods and services / tax on sales / purchases / consumer spending (1) Allow an answer that explains that the tax is levied on a VAT / GST / import tariff (1). producer but passed onto consumers to pay. Do not reward answers that refer to a tax levied on a third party. 3(b) Explain two benefits of MNCs to their home countries. 4 One mark for each of two benefits identified and one mark Logical explanation which might include: for each explanation. Increasing income / improving the current account balance / raise living standards /higher tax revenue (1) if profits Note: common error is to confuse host and home country so returned to home county (1). before awarding marks be clear that the candidate is not writing about the host country. Reduces prices in the home country (1) if goods now produced at lower costs in host countries (1). Reduce unemployment (1) employment of workers from the home countries in host countries / may employ more in head office (1). Higher revenue for firms (1) which may increase their profits (1) can gain subsidies/grants from host countries governments (1) May e.g. be able to dump waste materials / reduce pollution (1) host countries may have fewer rules and regulation (1). 3(c) Analyse how an increase in productivity can affect 6 Candidates need to be clear about distinction between unemployment. productivity and production. Coherent analysis which might include: An increase in productivity will lower average costs of production (1) may increase output / revenue (1) raise firms’ profits (1) may encourage firms to expand / attract MNCs (1) employ more workers (1) reducing unemployment (1). An increase in productivity will make firms more competitive internationally (1) leading to more exports (1) and higher demand for labour further reducing unemployment (1). May enable the same or more output to be produced with fewer workers (1) saving money / increasing profits (1) may increase unemployment (1). Higher productivity may mean higher wages (1) raising consumption / demand for goods and services (1) more incentive to seek employment / leading to more employment (1). Increase productivity may be due to capital investment / better equipment /technology (1) could reduce demand for labour (1). 3(d) Discuss whether or not a decrease in a country’s 8 Level Description Marks unemployment rate will reduce poverty. 3 A reasoned discussion which 6–8 In assessing each answer, use the table opposite. accurately examines both sides of the Why it might: economic argument, making use of • may increase employment economic information and clear and • may raise incomes logical analysis to evaluate economic issues and situations. One side of the • may enable people to buy more goods and services argument may have more depth than • may reduce the gap between the high-paid and the low- the other, but overall both sided of the paid argument are considered and • More government tax revenue to spend on developed. There is thoughtful benefits/services for poor. evaluation of economic concepts, terminology, information and/or data Why it might not: appropriate to the question. The • may not be an increase in employment – unemployed discussion may also point out the may have left the labour force e.g. emigrated, retired possible uncertainties of alternative • may be in low-paid jobs decisions and outcomes. • may be in part-time jobs • some of the poor are not in the labour force e.g. 2 A reasoned discussion which makes 3–5 homemakers, sick and informal economy use of economic information and clear • may result in inflationary pressures reducing real analysis to evaluate economic issues and situations. The answer may lack incomes • may reduce absolute poverty but may not reduce some depth and development may be one-sided. There is relevant use of relative poverty. 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
Q25 · Living standards, including education, have improved for most people in South Africa in… 0455/21 May/June 2023
2 Living standards, including education, have improved for most people in South Africa in recent years. Most households have more money and the government has more tax revenue. There is, however, considerable income inequality. In 2020, 36% of the population were living in poverty. An increase in unemployment benefit payments might reduce this poverty. (a) Identify two functions of money. [2] (b) Explain how improved education may affect the demand for cigarettes and for fresh fruit. [4] (c) Analyse the causes of an increase in a government’s tax revenue. [6] (d) Discuss whether or not an increase in unemployment benefit payments would reduce poverty. [8]
20 marks
Mark scheme: 2(a) Identify two functions of money. Two from: Medium of exchange Unit of account / measure of value Store of value Standard of deferred payments 2 Note: a description of the function, without the term, gets a mark e.g. money can be used to buy and sell products, may be used to trade. Nothing for characteristics of money. If more than two functions are given, consider the first three. 2(b) Explain how improved education may affect the demand for cigarettes and for fresh fruit. Logical explanation which might include: It may reduce demand for cigarettes (1) people may be better informed about harmful effects / cigarettes are a demerit good (1). It may increase demand for fresh fruit (1) people may be better informed about beneficial effects / fresh fruit is a merit good / may gain better paid jobs and so able to afford fresh food (1). 4 Only accept demand for cigarettes may increase if linked to higher income (resulting from improved education). One mark for each of two reasons identified and one for each of two explanations. Question Answer Marks Guidance 2(c) Analyse the causes of an increase in a government’s tax revenue. Coherent analysis which might include: Tax revenue is government income / part of government fiscal policy (1) which can be spent on government objectives e.g. education (1) Increase in employment (1) increase in income (1) More convenient (1) easier to pay (1) and collect the tax (1) higher income tax revenue (1) Increase in spending (1) higher indirect tax revenue (1) Increase in profits (1) higher corporation tax (1) Increase in population (1) more people to pay taxes (1) Change in tax rates (1) higher tax rates can increase revenue without a change in income / spending / profits (1) lower tax rates may reduce tax avoidance / evasion (1) increase incentives (1) Greater efficiency in tax collection (1) reduction in corruption / simpler forms (1) Wider tax base (1) more products / more people taxed (1) Increase in imports (1) higher revenue from tariffs (1). 6 Question Answer Marks Guidance 2(d) Discuss whether or not an increase in unemployment benefit payments would reduce poverty. In assessing each answer, use the table opposite. Why it might: raise incomes of those on low incomes may enable them to buy more basic necessities may reduce absolute poverty may increase total demand higher total demand may reduce unemployment Also enable them to seek education / become more employable Why it might not: may be a disincentive to find employment people may become dependent on benefits will not help all those on low incomes e.g. the retired and the sick may not reduce relative poverty some of the unemployed may not claim benefits opportunity cost – government could spend on e.g. education which might be more effective. Size of unemployment benefit may be small and may be less than 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 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 2023
Q26 · Calculate the number of people who were living in poverty in Guyana in 2020 0455/22 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
Q27 · Calculate the total number of people in Cambridge aged 18–29 in 2019 0455/21 Oct/Nov 2023
1 (a) Calculate the total number of people in Cambridge aged 18–29 in 2019. [1] (b) Identify two types of industries in Cambridge that operate in the tertiary sector. [2] (c) Identify two benefits of having highly knowledge‑intensive exports. [2] (d) Explain how having a more educated labour force can reduce poverty. [4] (e) Draw a demand and supply diagram to show the effects of increased global income on the market for education in Cambridge. [4] (f) Analyse the relationship between the percentage of population aged 25–64 with a university degree and GDP per head. [5] (g) Discuss whether or not free trade is beneficial for a city such as Cambridge. [6] (h) Discuss whether or not firms in Cambridge will continue to grow. [6]
30 marks
Mark scheme: Question Answer Marks Guidance 1(a) Calculate the total number of people in Cambridge aged 18– 1 29 in 2019. 37 440 (1) 1(b) Identify two types of industries in Cambridge that operate in 2 If more than two types are given, consider the first three. the tertiary sector. Education (1). Healthcare (1). Research and development (1). 1(c) Identify two benefits of having highly knowledge-intensive 2 If more than two benefits are given, consider the first exports. three. Exports highly priced (1). Accept high value for highly priced. Price inelastic in demand (1). Increased demand for exports (due to increased global incomes) (1). 1(d) Explain how having a more educated labour force can 4 reduce poverty. Logical explanation which might include: a more educated labour force will be more skilled / more productive (1) enabling them to earn higher wages (1) able to afford basic necessities (1). a more educated labour force may have more job opportunities / less unemployment (1) wages may be higher than unemployment benefits (1). a more educated labour force has access to more information on health (1) increasing the ability to work (1) have access to better healthcare (1). 1(e) Draw a demand and supply diagram to show the effects of 4 increased global income on the market for education in Cambridge. D&S diagram: Axes correctly labelled – price and quantity or p and q (1). Original demand and supply curves correctly labelled (1). New curve shifted to the right (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 the percentage of 5 Responses do not have to be in the format suggested population with a university degree and GDP per head. but they should address the expected / normal relationship, offer supporting evidence of that, highlight Coherent analysis which might include: any exceptions to that, and analyse the overall data. Expected relationship: Positive / direct relationship (1) the higher percentage of population with a university degree, the higher the GDP per head (1). Analysis of expected relationship: as percentage of population with a university degree increases, the more skills / qualification they will have (1) therefore, they have higher productivity and can earn more (1). Supporting evidence: e.g. Indonesia lowest percentage of population with a university degree, lowest GDP per head ; Canada, Switzerland and UK have the highest three in each category; Colombia has the second lowest percentage of population with a university degree and the second lowest GDP per head (2). Exception: Switzerland (1) has lower percentage of population with a university degree than Canada or the UK, but higher GDP per head (1). Analysis of the exception: Other influences, e.g. quality of secondary education, proportion of the population employed in banking (1). 1(g) Discuss whether or not free trade is beneficial for a city 6 Apply this example to all questions with the such as Cambridge. command word DISCUSS (1g, 1h, 2d, 3d, 4d and 5d) Award up to 4 marks for logical reasons why it might, which may include: Each point may be credited only once, on either side of an argument, but separate development as to how / why • easier to export (1) increased export revenues (1) increased the outcome may differ is rewarded. revenue / profits for producers (1) higher growth in the city (1). Generic example mark • easier to import / more imports (1) cheaper imports of goods and materials / lower costs for firms (1) lower prices (of Tax revenue may decrease… 1 exports) (1). • more jobs created (1) reducing the level of unemployment ...because of reason e.g. incomes may be 1 (1). lower. • increase size of the market (1) economies of scale (1) e.g. purchasing / technical / marketing / managerial / financial Tax revenue may increase because 0 (1). incomes may be higher i.e. reverse of a • increased choice for consumers (1) from increased imports previous argument. (1) higher quality goods / variety of goods (1). • more competition (1) or more transfer of ideas and Tax revenue may increase because of a 1 knowledge (1) leads to more innovation (1) lower prices (1) different reason i.e. not the reverse of a • encourage entrepreneurship / investment (1) profit incentive previous argument e.g. government (1) spending on subsidies may stimulate the economy more than spending on education. 1(g) Award up to 4 marks for logical reasons why it might not, which may include: • overdependence on foreign markets (1) economic shocks in other countries can negatively affect revenues of firms (1) reduce economic growth and development in the city (1). • free trade could reduce competitiveness of firms (1) other economies might have relatively lower costs (1) cheap imports / more imports (1) stop development of infant industries (1) may lead to job losses in the city (1). • free trade only affects certain producers / firms / workers (1) leads to increased inequality / uneven distribution of income (1). • free trade leads to more environmental degradation (1) due to more production / more need for cross-border transport (1) creating external costs / negative externalities (1). • may increase consumption of demerit goods (1) reduce health (1). • free trade could lead to the creation of global monopolies (1). reducing the ability of smaller domestic firms to compete (1). 1(h) Discuss whether or not firms in Cambridge will continue to 6 grow. Award up to 4 marks for logical reasons why it might, which may include: • ease of access to a large amount of highly-skilled and educated workers, from all over the world (1) easy to find workers (1) to produce goods and services (1) or lower cost of labour (1) • skilled workers are more productive (1) more innovation / new ideas / high quality products (1) • young workers (1) may be up-to-date with modern technology (1) • good infrastructure (1) such as access to ultra-fast broadband (1) productivity is higher (1) faster production / less delays (1) • good transport links to other cities and international airports (1) easy to export / high demand for their exports (1) easy to reach customers (1) faster deliveries (1) increased demand for goods and services (1). Award up to 4 marks for logical reasons why it might not, which may include: • high land and office costs (1) high cost of production (1) higher capital start-up costs (1) lower profits (1) • high house prices (1) poor air quality (1) may discourage workers from locating in Cambridge (1) difficult for firms to find workers (1) • small population (1) small market (1) limited demand (1) limited scope for revenue / profits for Cambridge firms (1) • overdependence on one sector (e.g. education) (1) limits potential growth from other sectors (1) • skilled workers are available in other cities (1).
This question in 0455/21 Oct/Nov 2023
Q28 · Calculate what percentage of Honduran people did not have access to electricity in 2020 0455/22 Oct/Nov 2023
1 (a) Calculate what percentage of Honduran people did not have access to electricity in 2020. [1] (b) Identify two benefits the Honduran economy could gain from a growth in the US economy. [2] (c) Explain one advantage of an economy specialising. [2] (d) Explain two ways a government could redistribute income. [4] (e) Draw a demand and supply diagram to show how a report stating that bananas are good for health would affect the market for bananas. [4] (f) Analyse the relationship between the percentage of population living in poverty and life expectancy. [5] (g) Discuss whether or not the cost of producing clothes in Honduras will fall in the future. [6] (h) Discuss whether or not a fall in unemployment in Honduras is likely to cause inflation. [6]
30 marks
Mark scheme: Question Answer Marks Guidance 1(a) Calculate what percentage of Honduran people did not 1 Accept 8.0 or 8.3. have access to electricity in 2020. 8.3%. 1(b) Identify two benefits the Honduran economy could gain 2 If more than two benefits are given, consider the first three. from a growth in the US economy. Accept increase trade for more exports. Sell more exports to the US (1). Receive more money from Honduran workers in the US (1). Accept increase employment / lower unemployment for More job opportunities for Honduran workers in the US (1). more job opportunities. 1(c) Explain one advantage of an economy specialising. 2 One mark for an advantage identified and one mark an explanation. Gain skills (1) raise productivity / raise efficiency / ‘practice Identification mark must come directly from the source makes perfect’ / lower costs of production / raise quality / material. increase output / supply / less waste (1). A relevant explanation mark can be given even in the Gain a good reputation (1) increase demand (1). absence of an identification. 1(d) Explain two ways a government could redistribute 4 One mark each for each of two ways identified and one income. mark each for each of two explanations. Logical explanation which might include: If more than two reasons given, consider the first three. Provision of unemployment benefit / state benefit / welfare benefit / benefits (1) raise income of those on low or no One mark for taxing the rich and giving to the poor. income / enable the unemployed to buy basic necessities / reduce absolute poverty (1). Progressive income tax system (1) takes a higher proportion of the income of the rich / use some of tax revenue raised to increase spending to help those on low incomes (1). 1(e) Draw a demand and supply diagram to show how a 4 report stating that bananas are good for health would affect the market for bananas. Coherent analysis which might include: 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 right (1). Equilibriums – shown by lines P1 and Q1 and P2 and Q2 or equilibrium points marked as E1 and E2 (1). If a candidate draws two diagrams, they may be able to get 3 marks: 1 mark for axes 1 mark for D & S labelled correctly 1 mark for the demand curve shifted to the right. They would not get the mark for the equilibriums as the two diagrams are likely to conflict on this. 1(f) Analyse the relationship between the percentage of 5 Responses do not have to be in the format suggested but population living in poverty and life expectancy. 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: Inverse / negative (1) the higher the level of poverty, the lower the life expectancy / the lower the level of poverty, the higher the life expectancy (1). Supporting evidence: Sweden has the lowest % of population living in poverty and the highest life expectancy / The country / two countries / three countries / four countries with the lowest levels of poverty head had the longest life expectancy (1) the two countries, Chad and South Sudan, with the highest level of poverty had the lowest life expectancy (1). Analysis of expected relationship: A high level of poverty is likely to mean poor healthcare (1) low nutrition / poor housing / poor sanitation / low levels of education (1). Exception: Chad / South Sudan (1) Chad had a lower level of poverty but also a lower level of life expectancy than South Sudan (1) Analysis of exception: Life expectancy is determined by other influences e.g. wars (1). 1(g) Discuss whether or not the cost of producing clothes in 6 Allow higher productivity / efficiency once either in Honduras will fall in the future. connection with labour or capital. Some points may be given in reverse e.g. price of raw Award up to 4 marks for logical reasons why it might, which materials may fall. may include: Not accepting subsidising the clothes industry as the source • more training (1) better working conditions (1) may material indicates that it is a successful industry. increase labour productivity / efficiency / skills (1) reduce labour costs (1) Apply this example to all questions with the command • more use of capital goods (1) may reduce disruption to word DISCUSS production / make fewer mistakes / less waste (1) speed (1(g), 1(h), 2(d), 3(d), 4(d) and 5(d)) up production / increase productivity / efficiency (1) • improved working conditions (1) may reduce industrial Each point may be credited only once, on either side of an action (1) more motivation (1) argument, but separate development as to how/why the • successful clothes industry so firms may grow in size (1) outcome may differ is rewarded. more able to take advantage of economies of scale (1). Generic example Mark Award up to 4 marks for logical reasons why it might not, which may include: Tax revenue may decrease… 1 • price of raw materials may rise (1) may be subject to bad weather (1) exchange rate may fall / tariffs may be ...because of reason e.g. incomes 1 imposed on imported raw materials (1) reduce supply may be lower. (1) country has experience of inflation (1) • unemployment may fall (1) making it more difficult for Tax revenue may increase 0 the clothes industry to recruit labour (1) strengthening because incomes may be higher the bargaining power of workers (1) raising wages / i.e. reverse of a previous increasing labour costs (1) argument. • providing training (1) and better working conditions will involve a cost (1) Tax revenue may increase 1 • more use of capital goods may involve initial high because of a different reason i.e. not the reverse of a previous spending on equipment (1) firms may experience argument e.g. government diseconomies of scale (1) • higher indirect tax / tax may be imposed (on clothes / spending on subsidies may stimulate the economy more than clothes firms) (1). spending on education. 1(h) Discuss whether or not a fall in unemployment in 6 Honduras is likely to cause inflation. Award up to 4 marks for logical reasons why it might, which may include: • unemployment is already low (1) may move towards full employment (1) may push up wages (1) increase (average) costs (1) cause cost-push inflation / total supply less than total demand (1) • lower unemployment may increase incomes (1) causing a rise in consumer spending / purchasing power (1) increasing total demand (1) causing demand-pull inflation / total demand higher than total supply (1). • inflation already exists (1) which may lead workers to expect it to continue (1) increasing wage claims (1). Award up to 4 marks for logical reasons why it might not, which may include: • may be higher investment (1) could increase total supply / total supply may rise in line with total demand (1) reducing cost-push inflation (1) • lower unemployment could reduce spending on unemployment benefit (1) increase tax revenue (1) reduce the budget deficit (1) reduce the growth in total demand (1) some of higher tax revenue could be spent on supply-side policy / unemployment may have fallen due to supply-side policy (1) • the extra income may be saved / spent on imports (1) due to uncertainty about the future (1) • A fall in unemployment does not necessarily mean a rise in employment (1) the unemployed could have e.g. retired / emigrated (1).
This question in 0455/22 Oct/Nov 2023
Q29 · In 2019, Mozambique was hit by a serious storm which destroyed bridges, factories, roads… 0455/23 Oct/Nov 2023
2 In 2019, Mozambique was hit by a serious storm which destroyed bridges, factories, roads and electricity lines. Almost 60% of Mozambique’s population live in absolute poverty. The country’s people are keen to increase Mozambique’s economic development. There is a high level of government intervention in Mozambique’s economy. Although Mozambique does not impose import quotas, it does impose a range of import tariffs. (a) Identify two reasons why a person may experience absolute poverty. [2] (b) Explain two causes of an increase in a country’s economic development. [4] (c) Analyse, using a production possibility curve (PPC) diagram, the effect of a serious storm on an economy. [6] (d) Discuss whether or not imposing tariffs on imports will increase a country’s output. [8]
20 marks
Mark scheme: 2(a) Identify two reasons why a person may experience 2 If more than two reasons are given, consider the first three. absolute poverty. Two from: • unemployment • sickness / mental health / poor health • old age • refugees • war / famine / natural disasters • lack of government benefits • low level of education / social skills • income too low to afford basic necessities. 2(b) Explain two causes of an increase in a country’s 4 One mark each for each of two causes identified and one economic development. mark each for each of two explanations. Logical explanation which might include: If more than two causes are given, consider the first three. Improvements in education (1 improve production capacity Note: the development mark might apply to several causes can raise wages / reduce unemployment (1). and are therefore interchangeable. Improvements in healthcare (1) can increase life expectancy (1). Improvements in technology (1) better quality goods and services (1) Increase in savings (1) provide finance for investment (1). Increase in investment (1) raise quality of output / economic growth (1). Increase in FDI (1) can increase job opportunities (1). Increase in proportion of workers in the tertiary sector (1) working conditions / pay may be better (1). Increase in incomes (1) able to buy more goods and services (1). Increase in government expenditure on infrastructure (1) improves labour mobility / access to resources (1). Increase in international trade / exports (1) creates more jobs / income (1). Discovery of new resources (1) e.g. oil improves production (1). 2(c) Analyse, using a production possibility curve (PPC) 6 diagram, the effect of a serious storm on an economy. Up to 4 marks for the diagram: Axes correctly labelled 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 indicated by arrow or letter (1). Up to 2 marks for coherent analysis which might include: A serious storm will reduce resources / reduce availability of factors of production / destroy infrastructure (1) reduce the ability to produce goods and services / reduce maximum capacity / reduce productive capacity (1). Note: both curves must touch both axes to get the marks. Note: Axes need labelling such as good X / good Y or capital goods and consumer goods. Labelling A and B is not sufficient. 2(d) Discuss whether or not imposing tariffs on imports will 8 Level Description Marks increase a country’s output. 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 analysis to evaluate economic issues and situations. • increase price of imports which may reduce demand for One side of the argument may have more imports depth than the other, but overall, both sides • people may switch to buying domestically produced of the argument are considered and products developed. There is thoughtful evaluation of • net exports may increase, raising total demand economic concepts, terminology, • the higher demand may encourage the country’s firms information and/or data appropriate to the to produce more goods and services question. The discussion may also point out • government could use tax revenue to subsidise the possible uncertainties of alternative domestic goods. decisions and outcomes. Why it might not: 2 A reasoned discussion which makes use of 3–5 economic information and clear analysis to • even with tariffs, imports may still be cheaper than evaluate economic issues and situations. domestically produced products The answer may lack some depth and • there may not be domestically produced substitutes development may be one-sided. There is • if tariffs are put on raw materials and capital goods, relevant use of economic concepts, costs of production could rise and demand may fall terminology, information and data • other countries may retaliate, raising price of exports appropriate to the question. and reducing demand for the country’s exports. 1 There is a simple attempt at using economic 1–2 definitions and terminology. Some reference Note: level 1 would be knowledge and understanding of imports and tariffs or just identification of points. 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 0455/23 Oct/Nov 2023
Q30 · In 2020, wages paid to Mexican workers, including those in the primary sector, fell 0455/22 May/June 2024
2 In 2020, wages paid to Mexican workers, including those in the primary sector, fell. This fall contributed to a 9% rise in poverty in the country. In the same year, many small and medium-sized firms closed down. The country also suffered from traffic congestion. Its capital, Mexico City, is the world’s most congested city. (a) Identify two possible opportunity costs of producing primary sector products. [2] (b) Explain two policy measures which may reduce poverty. [4] (c) Analyse how the closure of firms may harm consumers. [6] (d) Discuss whether or not a government should encourage people to walk to school and work. [8]
20 marks
Mark scheme: 2(a) Identify two possible opportunity costs of producing primary sector products. Secondary sector products / capital goods / manufactured goods (1) tertiary sector products / services (1) Wildlife habitats/quality of the ecosystem (1) 2 If more than 2 are given, consider the first 3. Question Answer Marks Guidance 2(b) Explain two policy measures which may reduce poverty. Logical explanation which might include: Introduce / increase minimum wage (1) help low-paid workers / raise income of low-paid workers (1). Provide state benefits (1) e.g. unemployment benefit can enable those who have lost their jobs to purchase basic necessities (1). Reduce indirect taxation (1) tax on goods and services tends to fall more heavily on the poor (1). Provide education / training (1) increase earning potential / income / employment opportunities (1). Job creation schemes / increase jobs in the public sector (1) e.g. expanding state-owned firms / increase employment / raise incomes / Subsidising private sector firms (1) lower prices (1). Reduction in interest rate / expansionary monetary policy (1) encouraging firms to expand / take on more workers (1). Increase in government spending (1) increase employment opportunities (1). Reduce direct taxation / expansionary fiscal policy (1) which may encourage firms to expand and take on more workers / increase disposable income (of the poor) (1). Progressive taxes (1) reduce relative poverty (1). Provide job information (1) reduce frictional unemployment (1). Introduce a maximum price (1) to make necessities more affordable (1). 4 One mark each for each of two policy measures identified and one mark for each of two explanations. If more than 2 policy measures are given, consider the first 3. Explanation marks e.g. reduce unemployment can be given without identification of policy measure as a candidate may write e.g. use a policy measure that will reduce unemployment. Question Answer Marks Guidance 2(c) Analyse how the closure of firms may harm consumers. Coherent analysis which might include: May reduce competition (1) increase monopoly power / market share (1) may result in higher prices (1) may not innovate / spend on R&D / become inefficient / complacent (1) lower quality (1) slower to respond to changes in consumer demand (1). May mean that consumers have to travel further to purchase products (1) may take time to find alternatives (1) there may be a reduction in the range of products available / less choice / less variety (1) lower quantity / it may not be possible to buy some products (1). May reduce consumer confidence (1) lowering quality of life / reduce consumer welfare / living standards (1). May reduce external economies of scale (1) example (1) raise average cost (1) which may raise price (1). 6 Focus should be on consumers. One mark in total for higher price. Question Answer Marks Guidance 2(d) Discuss whether or not a government should encourage people to walk to school and work. In assessing each answer, use the table opposite. Why it might: may make people healthier may raise productivity may reduce healthcare costs may reduce pollution and traffic congestion may be less need for car parking space. Why it might not: may not be safe may make people late may increase stress and lower productivity may reduce demand for bus and train use may cause some bus and train drivers to lose their jobs may restrict job choice due to distance from home. 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 Question Answer Marks Guidance 2(d) Level Description Marks 0 A mark of zero should be awarded for no creditable content. 0
This question in 0455/22 May/June 2024
Q31 · Calculate Romania’s current account deficit on its balance of payments in $s 0455/22 Feb/March 2025
1 (a) Calculate Romania’s current account deficit on its balance of payments in $s. [1] (b) Identify two reasons why Romania’s population fell between 1990 and 2022. [2] (c) Explain why immigration into Romania may increase in the future. [2] (d) Explain two reasons why household spending has increased in Romania. [4] (e) Draw a demand and supply diagram to show the effect of setting a maximum price on electricity. [4] (f) Analyse the relationship between GDP per head and average spending on food as a percentage of total household spending. [5] (g) Discuss whether or not foreign MNCs reduce poverty in their host countries. [6] (h) Discuss whether or not a higher proportion of women is likely to enter Romania’s labour force in the future. [6]
30 marks
Mark scheme: Question Answer Marks Guidance 1(a) Calculate Romania’s current account deficit on its balance of 1 Accept 27bn without $. payments in $s. $27 000 000 000. $27 10⁹ $27bn (1). $2.7 10 to the power 10. 1(b) Identify two reasons why Romania’s population fell between 1990 2 and 2022. Fall in birth rate (1) emigration / net emigration / people leaving the country (1). 1(c) Explain why immigration into Romania may increase in the future. 2 1 mark for identification of high economic growth rate, and 1 mark for explanation. High economic growth rate / economic growth (1) higher wages / higher income / more chance of employment / more job opportunities / higher living standards (1). 1(d) Explain two reasons why household spending has increased in 4 Romania. Logical explanation which might include: • Romanians have become wealthier (1) more money to spend / greater purchasing power / higher income / higher GDP per head / can sell assets to get money to spend / more able to borrow / greater confidence (1). • More confident about the future / increased optimism (1) about future job prospects / higher earning / job security / may encourage more borrowing / less saving (1). • Low interest rates (1) encourage borrowing / reduce cost of borrowing / discourage saving (1). • High rate of inflation (1) spending more to maintain living standards (1). 1(e) Draw a demand and supply diagram to show the effect of setting a 4 maximum price on electricity. Coherent analysis which might include: D&S diagram: Axes correctly labelled – price and quantity or p and q (1). Demand and supply curves correctly labelled (1). Maximum price set below the equilibrium price – labelled as max price, P1, PX or any other P. (1). Quantity demanded and quantity supplied at the maximum price identified (1). 1(f) Analyse the relationship between GDP per head and average 5 Responses do not have to be in the format spending on food as a percentage of total household spending. suggested but they should address the expected/normal relationship, offer supporting Relationship (up to 2 marks): evidence of that, highlight any exceptions to Generally, an inverse relationship / negative relationship (1) the higher that, and analyse the overall data. the GDP per head, the lower the average household spending on food as a % of household spending (1). Supporting evidence (up to 2 marks): E.g. the five countries with the lowest GDP per head had the highest % Supporting evidence should involve average household spending on food (1). Ethiopia had the lowest GDP interpretation, not just description but note: per head and the highest average household spending on food as a % of A mark can be given for an implied comparison total spending (1) Cambodia had the second lowest GDP per head and e.g. the second highest spending on food as a % of total spending (1) Egypt after stating that there is a negative relationship had the third lowest GDP per head and the third highest spending on (1): food as a % of total spending (1). e.g. Belgium had a GDP per head of $52 100 and only spent 13% of their total spending on food whereas Romania had a GDP per head of Analysis of relationship (up to 2 marks): $15 000 and spent 26% of their spending on As households get richer, they can afford to spend more in total on food / food (1), higher quality food (1) but can afford to buy more of other items / buy more luxury items / spend less on necessities (1). Rewarding GDP per head (income) but not just GDP. Exception (up to 2 marks): Norway / USA (1) Norway had a higher GDP per head but also a higher % of household spending on food (1). Analysis of exception (up to 1 mark): Food may be more expensive in Norway / Norwegians may have a different diet / buy a higher proportion of high quality food (1). 1(g) Discuss whether or not foreign MNCs reduce poverty in their host 6 Apply this example to all questions with the countries. command word DISCUSS (1g, 1h, 2d, 3d, 4d and 5d) Award up to 4 marks for logical reasons why they might, which may include: Each point may be credited only once, on either • they may increase employment / reduce unemployment (1) which side of an argument, but separate development may increase incomes / increase wages (1) cause economic growth / as to how/why the outcome may differ is raise GDP (1) enabling people to buy more basic necessities / raise rewarded. purchasing power (1). • may train workers (1) increase skills (1). Generic example Mark • they may have lower costs of production / more efficient (1) use more advanced technology (1) may take advantage of economies of Tax revenue may decrease… 1 scale (1) able to charge lower prices (1). • they may pay tax / less may be spent on unemployment benefit (1) ...because of reason e.g. incomes 1 some of this could be spent on e.g. education / healthcare / training may be lower. unemployed (1) income could be redistributed (1). Tax revenue may increase because 0 Award up to 4 marks for logical reasons why it might not, which may incomes may be higher i.e. reverse include: of a previous argument. • they may replace domestic firms / drive domestic firms out of business (1) may employ workers from their own countries (1) Tax revenue may increase because 1 leaving employment / unemployment unchanged (1). of a different reason i.e. not the • they may use capital-intensive methods (1) reducing demand for reverse of a previous argument e.g. unskilled workers (1). government spending on subsidies • they may use up non-renewable resources (1) reducing incomes in may stimulate the economy more the future / raising prices (1). than spending on education. • they may send profits back home (1) making them unavailable for re- investment in the host country (1). Extract from the source material: • may increase relative poverty / not reduce relative poverty (1) may More MNCs may affect poverty because of the widen gap in pay between e.g. skilled and unskilled workers (1). possible effects on unemployment and prices. • may become a monopoly (1) charge high prices (1). 1(h) Discuss whether or not a higher proportion of women is likely to 6 Extract from the source material: enter Romania’s labour force in the future. There is a range of influences on whether women enter the labour force. These include Award up to 4 marks for logical reasons why it might, which may include: social attitudes, female education and whether • there may be an increase in childcare facilities (1) making it easier childcare facilities and part-time work are for women who are parents to work (1) available. • more part-time work / more job opportunities for women / shortage of No marks for just reproducing these words. labour / higher demand for labour (1) lower birth rate (1) which may Interpretation needed e.g. more part-time work. enable women to combine work and child rearing (1) • increase in female education / qualifications / training (1) which may Many of the influences can be given either way increase skills / productivity (1) which may increase wages (1). but only reward identification of the influence • increase in healthcare / family planning (1) reduce size of families (1) once e.g., one mark for there may be increase • may seek to reduce poverty / improve living standards (1) by earning in childcare facilities or a decrease in childcare facilities. an income (1). Award up to 4 marks for logical reasons why it might not, which may include: • discrimination may occur (1) in terms of jobs available / wages (1). • negative social attitudes may continue (1) e.g. other workers may make the working environment uncomfortable for women (1). • women may emigrate (1) leaving the labour force (1) • working hours may increase (1) making it more difficult for women to combine work and home life (1). • An increase in income / higher household income (1) may enable women to work fewer hours / reduce need to work (1).
This question in 0455/22 Feb/March 2025
Q32 · Calculate the number of people who are in poverty in Egypt 0455/23 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
Q33 · Lanzarote, a Spanish island, was once an area with very high rates of poverty 0455/21 Oct/Nov 2025
4 Lanzarote, a Spanish island, was once an area with very high rates of poverty. However, the rise of tourism has greatly reduced unemployment. The government is trying to attract more workers to the island by using non‑wage factors. Lanzarote’s low taxes also attract workers to the island. Mobility of labour in the island’s economy has also increased. (a) Identify two non‑wage factors that may influence a worker’s job choice. [2] (b) Explain how unemployment can lead to poverty. [4] (c) Analyse the influences on the mobility of labour. [6] (d) Discuss whether or not low taxes are beneficial for an economy. [8]
20 marks
Mark scheme: 4(a) Identify two non-wage factors that may influence a 2 Accept any relevant non-wage factors. worker’s job choice. If more than two non-wage factors are given, consider the Two from: first three. • job security • fringe benefits • recognition at work • company car • holidays • working hours • flexibility / ability to work from home • location of workplace • available transport • nearness to family 4(b) Explain how unemployment can lead to poverty. 4 Logical explanation which might include: • unemployment may lead to a loss of a source of income (1) unable to afford basic necessities (1) leading to absolute poverty (1) may reduce ability to provide a good standard of living for family (1) poor education (1) health problems (1) child poverty (1) • long term unemployment (1) loss of skills (1) cannot re- enter the job market (1) unable to earn a living (1) • the unemployed may claim unemployment benefits (1) with lower income than those working (1) leading to relative poverty (1). • unemployment will lead reduced (income) tax revenue (1) less available to spend on public services that reduce poverty (1). 4(c) Analyse the influences on the mobility of labour. 6 Coherent analysis which might include: • labour could be occupationally mobile (1) influenced by skills / qualification / knowledge (1) if they are transferable (1) then labour is more occupationally mobile (1) • labour could be geographically mobile (1) influenced by government regulations (1) e.g. visa requirements (1) cost of living in another area / country (1) access to transport (1) access to public transport / proximity to railway / ports (1) family ties may make workers immobile (1) access to working online / ability to work from home (1) • house prices in different areas / access to housing in different areas (1) low house prices make it easier to move for work (1) • incomes / tax systems in other countries (1) proficiency in another language (1) influencing workers to move abroad (1). 4(d) Discuss whether or not low taxes are beneficial for an 8 Level Description Marks 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 Why they might be: use of economic information and clear and logical analysis to • low income taxes increase disposable income, evaluate economic issues and increasing total (aggregate) demand situations. One side of the • low corporate income (corporation) taxes increase argument may have more depth profits after tax than the other, but overall, both • low indirect taxes, e.g. VAT, reduce prices of goods and sides of the argument are services considered and developed. There • low taxes on imports reduce prices of imports is thoughtful evaluation of • low taxes on firms encourage competition economic concepts, terminology, • low taxes on demerit goods increase external costs information and/or data appropriate • low income taxes prevent a ‘brain drain’ / attract foreign to the question. The discussion workers may also point out the possible • low corporate taxes attract overseas companies e.g. uncertainties of alternative MNCs. decisions and outcomes. 2 A reasoned discussion which 3–5 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. 4(d) Why they might not be: Level Description Marks • government revenue will be low – budget deficit / debt 1 There is a simple attempt at using 1–2 • not enough revenue to provide for public / merit goods economic definitions and e.g. education / healthcare terminology. Some reference may • higher inequality if progressive taxes are low be made to economic theory, with • higher inflation if direct taxes are low occasional understanding. • low taxes on merit goods improve external benefits. 0 A mark of zero should be awarded 0 for no creditable content.
This question in 0455/21 Oct/Nov 2025
Q34 · The Central African country Chad has a triangle-shaped population pyramid and a high… 0455/23 Oct/Nov 2025
4 The Central African country Chad has a triangle-shaped population pyramid and a high level of poverty. It regularly has an overall deficit on the current account of its balance of payments. Chad usually has a surplus on its secondary income. However, its trade in goods, trade in services and primary income are all usually in deficit. Some economists suggest that the Chadian Government should impose import quotas to reduce its trade in goods deficit. (a) Define primary income. [2] (b) Explain two influences on the shape of a country’s population pyramid. [4] (c) Analyse the causes of poverty. [6] (d) Discuss whether or not imposing import quotas will reduce a trade in goods deficit. [8]
20 marks
Mark scheme: 4(a) Define primary income. 2 Very few candidates understand this term. Component of the current account of the balance of Award one mark if there is any understanding that it relates payments (1). to the balance of payments with other countries. Example of an item: profit / interest / dividends / wages earned abroad (1). 4(b) Explain two influences on the shape of a country’s 4 One mark each for two influences identified and one mark population pyramid. each for two explanations. Logical explanation which might include: If more than two influences are given, consider the first three. • birth rate / fertility rate (1) a high birth rate / fertility rate will result in a wide base for the pyramid (1) Note: accept low birth rate, high life expectancy, emigration • life expectancy / death rate / aging population (1) high with reverse explanation. death rate / low life expectancy will result in a narrow top for the pyramid (1) • migration (1) high immigration of people of working age would result in a wide middle in the pyramid (1) • gender balance (1) example of imbalance in overall shape of pyramid (1). 4(c) Analyse the causes of poverty. 6 Answer requires more than one cause of poverty to get full marks. Coherent analysis which might include the following. Reference to absolute and relative poverty may be relevant • Low quantity / quality of education (1) can reduce job to more than one bullet point but only reward each once. opportunities (1) low skilled jobs (1) low paid jobs (1). • Unemployment (1) lower income (1) reliant on welfare Maximum of three causes can be given a mark. benefits (1). • Illness / disability (1) poor healthcare (1) reduce ability to earn an income (1). • Old age (1) may have low or no state benefits (1) absolute poverty (1). • Uneven distribution of income / wealth (1) resulting in relative poverty (1). • Corruption (1) reducing tax revenue available to spend on reducing poverty (1). • Large families (1) many children (1) trapped in / child poverty (1). • Single parent families (1) parent unable to work (1) reliant on state benefits (1). • Poor housing (1) harms health (1) limited access to employment (1) high cost of living (1). • Natural disaster / conflict (1) causes loss of ability to work / earn income (1). • Geographical immobility (1) prevents access to paid jobs (1). • Work in agriculture (1) where wages are low / not regular income (1). • High inflation (1) cannot afford to buy basic necessities (1). 4(d) Discuss whether or not imposing import quotas will 8 Level Description Marks reduce a trade in goods deficit. 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 analysis • restrict imports to evaluate economic issues and • lower supply may drive up price situations. One side of the argument may • consumers and firms may switch to domestic goods have more depth than the other, but • could reduce gap between import expenditure and overall, both sides of the argument are export revenue. considered and developed. • consumers and firms may switch to domestic substitutes There is thoughtful evaluation of • could reduce gap between import expenditure and economic concepts, terminology, export revenue. information and/or data appropriate to the question. The discussion may also Why it might not: point out the possible uncertainties of • import quotas may be higher than demand alternative decisions and outcomes. • depends on the breadth of goods affected – fewer goods, less effective 2 A reasoned discussion which makes use 3–5 • may not be domestic substitutes of economic information and clear • may be retaliation which could reduce export revenue analysis to evaluate economic issues • smuggling may occur and situations. The answer may lack some depth and development may be • reduction in import spending may appreciate currency one-sided. There is relevant use of value, reducing exports. economic concepts, terminology, information and data appropriate to the question. 4(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 an understanding of import quotas.
This question in 0455/23 Oct/Nov 2025
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