Government macroeconomic intervention — Paper 2 — IGCSE Economics (9-1) 0987 topical questions

Question 1

(a) Calculate Vietnam’s GDP per head in 2017. [1] (b) Identify two rewards to factors of production. [2] (c) Explain what happened to Vietn…

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Question Answer Marks 1(a) Calculate Vietnam’s GDP per head in 2017. 1 $6900 (1). 1(b) Identify two rewards to factors of production. 2 Wages (1) profits (1). 1(c) Explain what happened to Vietnam’s foreign exchange rate between 2 2010 and 2017. Logical explanation which might include: It fell/depreciated (1) more dong had to be given to buy one dollar (1). 1(d) Explain two benefits an economy may gain from having a young 4 labour force. Logical explanation which might include: May be more flexible (1) switch from doing different tasks (1). May be more mobile (1) able to switch from one job to another or from one place to another place (1). May be more up to date with advances in technology (1) more productive/able to use advanced technology (1). 1(e) Analyse why Vietnam’s budget deficit may decline in the future. 4 Coherent analysis which might include: High economic growth will raise incomes/wages rising (1) higher profits (1) more revenue from direct taxes (1) higher incomes is likely to result in more spending (1) more revenue from indirect taxes (1). Tax rates may be increased (1) reducing the gap between tax revenue and government spending (1). Deregulation / privatisation may increase profits (1) resulting in higher revenue from direct taxes /corporation tax (1). 1(f) Analyse the relationship between government spending on education 5 and the percentage of the labour force employed in the tertiary sector. Coherent analysis which might include: Generally the countries with the highest % spending on education have the highest percentage employed in the tertiary sector and vice versa (1) up to two examples e.g. Norway has the highest % spending and the highest % employed in the tertiary sector, Bangladesh has the lowest % spending and the lowest % employed in the tertiary sector (2) the main exception is Vietnam – second highest % spending but lowest % employed in the tertiary sector (1) there may be a time lag in this case (1). It is the expected relationship as some tertiary jobs require high skills (1) countries that can afford to devote a high percentage of resources to education may have achieved a relatively high level of development (1) a higher percent spent will create jobs in education (1). 1(g) Discuss whether or not an increase in competition is likely to benefit 6 Vietnamese consumers. 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. 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: • prices may be reduced to attract more consumers (1) making them more affordable to consumers (1) • choice will be increased in terms of sellers (1) and possibly in terms of a greater range of products (1) • quality may rise (1) with pressure being put on producers to produce good products to attract consumers (1) • producers may respond more fully to changes in consumer demand (1) Award up to 4 marks for logical reasons why it might not, which may include: • firms may be smaller (1), less able to take advantage of economies of scale (1), so prices may be higher (1) • firms may have less profit (1) and so spend less improving the quality of the product (1) • some firms may be MNCs (1), less concerned about causing external costs (1) 1(h) Discuss whether or not the increase in borrowing is likely to have 6 caused inflation in Vietnam in 2017. Award up to 4 marks for logical reasons why it might, which may include: • higher consumer demand (1) and investment (1) will increase total (aggregate) demand (1) • higher total demand may cause demand-pull inflation/cause producers to raise prices (1) • government spending may rise, further adding to total (aggregate) demand (1) • the economy has very low unemployment/full employment (1) making it difficult for supply to respond to higher demand (1) • tax rates may rise (1) which may increase costs of production (1) causing cost-push inflation (1) Award up to 4 marks for logical reasons why it might not, which may include: • higher investment may reduce costs of production (1) lowering cost- push inflation (1) • higher consumer spending may enable firms to grow (1) and take greater advantage of economies of scale (1) • increased education (1) may raise labour productivity (1), reduce costs of production (1) and lower cost-push inflation (1) • privatised firms may be more efficient (1) • more competition may reduce price rises (1)

Question 2

Economists are uncertain about the future United States (US) macroeconomic performance. For instance, in recent years, US unemployment has …

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4(a) Define macroeconomics. 2 The study of the whole economy (2). Example of a macroeconomic topic e.g. unemployment/study of economics on a large scale (1). 4(b) Explain two consequences to firms of unemployment. 4 Logical explanation which might include: Lower demand (1) lower revenue (1). Lower ability to take advantage of economies of scale (1) due to lower output (1). Lower average costs (1) lower wages (1). Less risk of industrial action (1) workers afraid of losing their jobs (1). Greater ease of recruiting workers (1) reducing recruitment costs (1). 4(c) Analyse how tax cuts could increase exports. 6 Coherent analysis which might include: Lower indirect taxes could reduce costs of production (1) could encourage investment (1) use of more advanced technology/more efficient methods of production (1) which could lower prices / make prices more internationally competitive (1). Lower income tax could motivate workers (1) raise productivity (1) lower price of exports (1) raise quality of exports (1). Lower taxes in other countries (1) e.g. a lower tariff will encourage foreigners to purchase more exports (1). 4(d) Discuss whether or not a current account deficit on its balance of 8 payments harms an economy. 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: • income/demand is leaving the economy • employment will be lower than it could be • it may put downward pressure on the exchange rate • the country will get into debt • other countries may not be willing to lend to it / invest in the country. Why it might not: • deficit may be low / short term • enables the country to consume more than it produces • imports of raw materials and capital goods will increase output in the future.

Question 3

The Indian government has declared that the country, now a major car producer, will sell only electric cars by 2030. The government wants t…

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2(a) Define external costs. 2 Harmful effects (1) on third parties (1). Social costs – private costs (1). 2(b) Explain two influences on whether demand for a product is price- 4 elastic or price-inelastic. Logical explanation which might include: Availability of substitutes (1) close substitutes will be likely to result in demand being price-elastic (1). Whether the product is a luxury or necessity (1) luxuries tend to have elastic demand/necessities tend to have inelastic demand (1). Proportion of income spent on the production (1) demand tends to be inelastic if a small proportion is spent on it/ elastic if a high proportion is spent on it (1) Whether the purchase can be postponed (1) if so, demand is likely to be elastic, if not inelastic. Addictiveness of the product (1) addictive products are likely to have inelastic demand (1). Time period (1) demand tends to become elastic over time (1). 2(c) Analyse, using a demand and supply diagram, how a subsidy given to 6 producers could affect the market for electric cars. Up to 4 marks for the diagram: Axes correctly labelled – price and quantity or p and q (1). Demand and supply curves correctly labelled (1). Supply curve shifted to the right (1). Equilibriums – shown by lines P1 and P2 / Q1 and Q2 or equilibrium points E1 and E2 (1). Up to 2 marks for coherent analysis which might include: A subsidy encourages firms to produce more/equivalent to a reduction in costs (1). Price will fall/quantity traded will rise (1). 2(d) Discuss whether cars should be produced by the private sector or the 8 public sector. 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 cars should be produced by the private sector: • may be a more competitive market and so prices may be lower • profit incentive may raise efficiency and encourage firms to produce what consumers want and keep costs low • may be higher investment which could improve quality and lower costs • may be easier to raise finance as can sell shares • may be forced to be efficient as may not be supported by the government Why cars should be produced by the public sector: • a private sector monopoly may abuse market power and may restrict supply and raise price • public sector firm to charge low prices/prices below cost for cheap cars to help the poor • public sector firms may take into account external costs and benefits/welfare • the state may have more financial resources and be able to invest on a larger scale.

Question 4

The population of Hungary is the most obese in Europe. Hungarians eat fewer vegetables than most Europeans and more food types that may be …

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3(a) Define demerit good. A product which is more harmful to consumers than they realise / the government considers is more harmful (2). It is over-consumed / overproduced (1) it creates external costs (1). A product that is harmful (1). 3(b) Explain the difference between an extension in demand and an increase in demand. Logical explanation which might include: An extension in demand is caused by a change in the price of the product (1) rise in quantity demanded (1) it is shown by a movement along the demand curve (1). An increase in demand is caused by a change in an influence on demand other than a change in the price of the product / means more is demanded at each and every price (1) example of a cause of an increase in demand e.g. rise in incomes (1) it is shown by a shift in the demand curve (1). 4 Up to 2 marks for diagram(s) showing the difference. Maximum of 2 marks for extension in demand and a maximum of 2 marks for an increase in demand. Question Answer Marks Guidance 3(c) Analyse the effects on income distribution and tax revenue of an increase in indirect taxes. Coherent analysis which might include: Income is likely to become less evenly distributed (1) indirect taxes are usually regressive (1) taking a larger percentage of income of the poor (1). Tax revenue likely to rise (1) will rise more on goods with inelastic demand (1) e.g. food (1) may fall if demand falls significantly (1). If any extra tax revenue is spent on lower income groups (1) e.g. welfare benefits (1) the effect on income distribution is less certain / income may be more evenly distributed (1). Tax evasion and avoidance is less common in the case of indirect taxes (1) though there may be informal markets (1). 6 Question Answer Marks Guidance 3(d) Discuss whether or not a government should impose a maximum price on food. In assessing each answer, use the table opposite. Why it should: • may influence price and quantity purchased • if set below the equilibrium level, will reduce price • some people will be able to purchase food at a lower price • may reduce poverty – food is a basic necessity • may stop monopoly food producers setting high prices. Why it should not: • if set above the equilibrium, it will have no effect • it set below the equilibrium, will result in shortages • some additional measure will have to be introduced to ration out food • some foods may be harmful to health and their consumption should be discouraged • may result in firms making losses and so reducing quality of food or employment of workers • free market forces may result in a more efficient allocation of resources. 8 Level Descriptors Mark 3 A reasoned discussion which accurately examines both sides of the economic argument, making use of economic information and clear and logical analysis to evaluate economic issues and situations. One side of the argument may have more depth than the other, but overall both sides of the argument are considered and developed. There is thoughtful evaluation of economic concepts, terminology, information and/or data appropriate to the question. The discussion may also point out the possible uncertainties of alternative decisions and outcomes. 6–8 2 A reasoned discussion which makes use of economic information and clear analysis to evaluate economic issues and situations. The answer may lack some depth and development or may be one-sided. There is relevant use of economic concepts, terminology, information and data appropriate to the question. 3–5 1 There is a simple attempt at using economic definitions and terminology. Some reference may be made to economic theory, with occasional understanding. 1–2 0 A mark of zero should be awarded for no creditable content. 0 Question Answer Marks Guidance 3(d) Example of L2 answer: Government should impose a maximum price on foods. Price is likely to fall and this will aid those in poverty. They will be able to buy basic necessities easier and allow them to spend on other things. Governments should not impose a maximum price on food as it can cause businesses to make a loss and need government subsidisation. Principal Examiner comment: Reasonable on one side and limited on the other side. The effect on price, quantity demanded and quantity supplied may be shown on a diagram.

Question 5

(a) Calculate Chile’s agricultural output in 2017. [1] (b) Identify two disadvantages of a country specialising. [2] (c) Explain one reason…

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1(a) Calculate Chile’s agricultural output in 2017. $11.76bn / $11 760 000 000 / $11 760m (1). 1 Accept $11.8bn and $12bn. $ is not essential. 1(b) Identify two disadvantages of a country specialising. Two from: • demand may fall / new competitors may appear • supply/output may fall / diseases / natural disasters / bad weather may affect agricultural output / costs may rise • non-renewable resources may run out • structural unemployment may occur • reliance on imports no longer produced by home country / overdependency on other countries 2 One mark each for each of two disadvantages. Rely on a small number of industries is not sufficient. 1(c) Explain one reason why demand for cherries is price-elastic. A luxury product (1) they do not have to be purchased / not essential / not a necessity (1). Has close substitutes (1) example / rise in price will cause some people to switch to rival products (1). 2 In terms of close substitutes, also accept: fall in price will cause some people to switch towards this product and away from rival products. One mark for the reason identified and one mark for the explanation. A candidate who writes a luxury product and has close substitutes and no more has identified two reasons, so just one mark. If a candidate identifies one of the two reasons but does not explain it and then identifies the second reason and explains it, the second reason can be taken and with the explanation, 2 marks. Question Answer Marks Guidance 1(d) Explain how Chile’s population structure differs from Haiti’s population structure. Logical explanation which might include: Chile has a higher proportion of its population aged over 65 / Haiti a lower proportion aged over 65 (1). Chile has a lower proportion of the population aged under 15 / Haiti has a higher proportion aged under 15 (1). Chile is likely to have a lower birth rate / Haiti is likely to have a higher birth rate (1). Chile likely to have a lower death rate / Haiti is likely to have a higher death rate (1). Chile’s population pyramid indicates a relatively high level of development/high income country / Haiti’s population pyramid indicates a relatively low level of development/low income country (1). Chile’s population pyramid is less pyramid shaped / more stationary / constrictive / bulges out in the middle / more egg-shaped / Haiti’s is more pyramid shaped / more expansive (1). Lower dependency ratio in Chile / higher dependency ratio in Haiti (1). Higher proportion of population of working age in Chile / lower proportion of population of working age in Haiti (1). Higher population size in Chile / lower population size in Haiti (1). 4 Accept for the first and second points other relevant age ranges e.g. over 60, under 10. Accept longer life expectancy for lower death rate and shorter life expectancy for higher death rate. Note that each country overall has more females than males, so not a difference. Question Answer Marks Guidance 1(d) Chile has a higher average age / older population / Haiti has a lower average age population / younger population (1). 1(e) Analyse why China buys most of its cherries from Chile. Coherent analysis which might include: Chile has high production standards (1) cherries are likely to be of a high quality (1). China does not impose tariffs on Chilean cherries (1) may keep their price low (1). 4 Free trade agreement on its own is not sufficient. 1(f) Analyse why Chilean astronomers are paid more than Chilean farm workers. Coherent analysis which might include: Most astronomers have a university degree (1) high cost of training/ long period of training (1) well qualified / well educated / high level of knowledge (1) highly productive / highly skilled / efficient (1) in short supply (1) high demand (1) more inelastic demand (1) more inelastic supply (1). Most work in the public sector (1) government may be more willing / able to pay higher wages (1) public sector workers are more likely to belong to a trade union (1) have stronger bargaining power (1). 5 Also accept an approach based on an analysis of why Chilean farm workers are paid less than Chilean astronomers. This may include reference to immigrant farm workers who may be prepared to accept relatively low wages and Chilean farm workers being replaced by capital equipment / more replaceable than astronomers. Question Answer Marks Guidance 1(g) Discuss whether or not Chilean consumers would benefit from more government intervention in the economy. Award up to 4 marks for why they might: • evidence of market failure (1) • merit goods may be underproduced (1) as under- consumed (1) • demerit goods may be overproduced (1) as overconsumed (1) • external costs could be reduced (1) external benefits may be increased (1) external costs / external benefits are not taken into account by the private sector (1) • public goods may not be produced (1) no profit incentive to make them (1) as there can be free riders (1) • inequality (1) poor consumers may lose out / there may be poverty (1) resources may not be devoted to producing what the poor need (1) may not be able to afford prices charged (1) • government subsidies (1) can lower prices (1) • government could set maximum prices (1) lower prices of necessities (1) • government could control (private sector) monopoly power (1) prevent abuse of market power (1) • government investment in education (1) could lower prices / raise quality of output (1). Award up to 4 marks for why they might not: • government failure may occur (1) e.g. government may lack information (1). • market forces can provide wide choice of products (1) may be consumer sovereignty (1) 6 Apply this example to all questions with the command word DISCUSS (1(g), 1(h), 2(d), 3(d), 4(d) and 5(d)) Not taking lower taxes, lower subsidies or reduced immigration controls as a form of government intervention. 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) • profit incentive (1) industries may respond to changes in consumer demand (1) • efficient industries (1) prices may be low (1) quality may be high (1) • government intervention in the form of nationalisation (1) may reduce competition (1). • government taxes / tariffs / regulation / minimum wages (1) may increase costs (1) raise prices (1) • maximum prices could reduce availability of products (1) • government limits on immigration (1) may reduce availability of products / raise prices (1) Question Answer Marks Guidance 1(h) Discuss whether or not the Haitian economy would benefit from fewer of its people working in Chile. Award up to 4 marks for why it might: • wages may be low in Chile (1) work involves unskilled labour (1) • employment may be rising in Haiti (1) the country could keep more of its skilled workers (1) • larger labour force / more workers (1) higher total demand (1) increase GDP / increase economic growth / increase productive potential (1) increase living standards (1) increase exports (1) • rise in the numbers employed in Haiti could increase tax revenue (1) may enable more spending on e.g. education (1) • fewer parents may leave behind dependent relatives (1) reduce burden on the government (1) • jobs could be found in other countries (1) Award up to 4 marks for why it might not: • wages may be higher in Chile (1) fewer emigrant workers may send money home (1) living standards may be lower (1) lower spending (1) • less money coming into the country (1) may increase a current account deficit (1) • job opportunities may be higher in Chile (1) unemployment may rise in Haiti (1) • if unemployment rises in Haiti, cost of unemployment benefits may rise (1) opportunity cost / higher taxation (1) • opportunities to gain new skills may be reduced (1) these skills could be brought back into the country (1) 6 For an approach which discusses whether or not the Haitian economy benefits from its people working in Chile, award a maximum of 3 marks. Question Answer Marks Guidance 1(h) • may reduce pressure to invest / spend on capital equipment (1) reduce advances in technology / reduce increases in efficiency / productivity (1) • may increase overcrowding / overpopulation (1) increase external costs / pollution (1) pressure on resources (1).

Question 6

Nearly one million people in Cairo, the capital city of Egypt, live in crowded, unhealthy housing. One reason why people lack basic necessi…

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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

Question 7

Trade union membership is much higher in Sweden than in most countries. In 2019, 70% of Swedish workers were members of a trade union. More…

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3(a) Identify two influences on what products a person buys. Two from e.g.: Price (1) income (1) tastes / habit / culture (1) advertising (1) availability (1) social media / influencers (1) quality (1) government regulations/ laws (1) age (1). 3(b) Explain two ways a government could decrease the consumption of demerit goods. Logical explanation which might include: Impose an (indirect) tax / tariff on goods (1) raise the price (1). Provide information (1) about harmful effects (1). Ban / regulate (1) to stop or reduce the availability of the product (1). Set minimum price above market price (1) raise prices (1). Import quota (1) restricts availability for purchase (1). 4 One mark for each of two ways identified and one mark for each explanation. Question Answer Marks Guidance 3(c) Analyse why workers may join a trade union. Coherent analysis which might include: Understanding of role of trade union (1) to gain greater bargaining power (1) through industrial action (1) to negotiate with employers (1) for higher wages (1) better working conditions / health & safety (1) fringe benefits (1). To represent them (1) in disputes with employers (1) e.g., to protect their rights (1) against unfair dismissal / discrimination (1) increase job security (1) compensation for work injuries (1). To gain greater influence on the government (1) to e.g., increase a national minimum wage (1) increase job opportunities (1). Unions may provide services to members (1) training courses (1) improving health and safety (1) benefits e.g. discounts at gyms (1) financial and legal advice (1). 6 Award no marks for examples of industrial action Question Answer Marks Guidance 3(d) Discuss whether or not tertiary sector workers are paid more than primary sector workers. In assessing each answer, use the table opposite. Why they might be:  may be more skilled / qualified  may be more productive  tertiary products may have higher value added  tertiary products may have higher demand, so industries may have greater ability to pay higher wages. Why they might not be:  may be less likely to belong to a trade union  some workers may be in lower paid jobs e.g., cleaners  some tertiary sector firms / occupations may be declining  some may be less experienced  some may not be in promoted posts  primary sector products may have higher value added e.g., oil  primary sector workers in a developed country may be paid more than tertiary workers in an undeveloped country.  primary jobs may be more dangerous e.g., mining 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 Note: accept approach that discusses why primary sector workers may be better paid. Define privatisation. Privatisation is the sale of state-owned / public sector firms / public sector assets (1) to the private sector / investors / individuals (1). 2 Award 1 mark for an understanding of the private sector Accept change / movement / turned from public to private sector

Question 8

(a) Calculate how many dollars 6400 Nigerian naira would have bought in 2019. [1] (b) Identify two ways a bank could increase demand for it…

Accepted Answer

Question Answer Marks Guidance 1(a) Calculate how many dollars 6400 Nigerian naira would 1 have bought in 2019. 16 (1). 1(b) Identify two ways a bank could increase demand for its 2 services. Open more branches (1) carry out an advertising campaign (1) improve online / mobile banking (1). 1(c) State why a merger between two commercial banks is a 2 horizontal merger. Same stage of production / both in the tertiary (service) sector / same sector (1) same industry / same product / same service (1) can increase market share (1). 1(d) Explain two reasons why a large US commercial bank 4 One mark for each of two reasons identified and one mark may charge a high price for its services. for each explanation. Logical explanation which might include: High spending on opening new branches / advertising campaigns / developing online banking (1) need to get back costs / make a profit / may experience diseconomies of scale (1). May offer high quality services (1) have high demand / customers willing to pay a high price (1). High degree of monopoly / market power / control 32% of market (1) customers may have brand loyalty / reluctant to switch banks / lack of substitutes / inelastic demand / can charge high prices to earn high profits/raise total revenue / be a price maker (1). High incomes in the US (1) many customers have the ability to pay a high price (1). Employ skilled / well educated workers (1) so may pay high wages / may have high costs of production (1). 1(e) Analyse how an increase in unemployment may affect 4 the Nigerian government’s budget. Coherent analysis which might include: Likely to increase a deficit / reduce a surplus / may result in a budget deficit (1). Tax revenue likely to fall / budget likely to fall (1) due to lower incomes (1) less income tax revenue (1) lower profits (1) less corporation tax revenue (1) lower spending (1) less indirect tax revenue (1) government may cut taxes to reduce unemployment (1). Government spending likely to rise (1) more spending on e.g. benefits / subsidies to the poor / law and order/ healthcare (1) may be more spending on measures to reduce unemployment / expansionary fiscal policy (1) may spend less on other areas e.g. education (1). 1(f) Analyse the relationship between countries’ average 5 No marks for just stating what the figures are e.g. Germany years of schooling and birth rates. has 15 years of schooling and a birth rate of approximately 8. US has 14 years of schooling and a birth rate of Coherent analysis which might include: approximately 12. Argentina has 11 years of schooling and Overview a birth rate of approximately 16 etc. Generally, an inverse relationship / the more years of schooling, the lower the birth rate / the fewer years of schooling, the higher the birth rate (1). Supporting evidence Up to 2 marks maximum for two pieces of relevant supporting evidence e.g.: • Germany has the highest years of schooling and lowest birth rate (1) • Chad has lowest years of schooling and highest birth rate (1) • US has more years of schooling than Argentina and so a lower birth rate (1) • the three countries with three highest years of schooling have the three lowest birth rates (1). Exception Nigeria / Eritrea (1) Nigeria has more years of schooling than Eritrea but a higher birth rate (1). Comments More years of schooling is likely to cause people to form partnerships / have children later / focus on careers / increase awareness of contraception/family planning / increase health / reduce size of families (1) increase cost of raising children / having more children may reduce the ability of families to keep their children in education for many years / exception may be result of other influences e.g. differences in fertility rates / differences in social attitudes (1). 1(g) Discuss whether or not a subsidy, given to farmers by 6 Apply this example to all questions with the command the Nigerian government, would reduce the deficit on word DISCUSS the current account of its balance of payments. (1g, 1h, 2d, 3d, 4d and 5d) Award up to 4 marks for logical reasons why it might, which Each point may be credited only once, on either side of an may include: argument, but separate development as to how/why the It should raise supply / increase output (1) equivalent to outcome may differ is rewarded. lower cost (1) lower price (1) increasing international competitiveness (1). Generic example mark There may be more funds available to invest (1) raise quality (1) increase exports / reduce imports (1). Tax revenue may decrease… 1 Award up to 4 marks for logical reasons why it might not, ...because of reason e.g. incomes may be 1 which may include: lower. It may increase inefficiency (1) as firms rely on the subsidy (1) may not pass on the benefit of the subsidy to consumers Tax revenue may increase because incomes 0 (1). may be higher i.e. reverse of a previous Nigeria may have a high inflation rate (1) which may offset argument. the cost advantage of the subsidy (1). There may an increase in incomes at home (1) which may Tax revenue may increase because of a 1 increase imports / divert exports to the home market (1). different reason i.e. not the reverse of a There may be a recession abroad / decrease in incomes of previous argument e.g. government spending trading partners (1) which reduces exports (1). on subsidies may stimulate the economy more Lower export prices will not raise export revenue if demand than spending on education. is inelastic (1). The exchange rate may rise (1) increasing export prices / lowering import prices (1). Farmers may import e.g. more machinery (1). There may be adverse weather conditions / disease (1) which reduces quality / quality may remain poor (1). There may be import restrictions / increase in import restrictions imposed by other countries (1). 1(h) Discuss whether or not the US government should 6 A minimum price diagram without explanation can get a impose a minimum price on chocolate. maximum of 2 marks. These marks may be the equivalent of a combination of two of higher price, demand extending, Award up to 4 marks for logical reasons why it should, supply extending or a surplus being created. which may include: It will raise price (1) reduce demand / demand contracts / quantity demand falls / consumption falls. (1) reduce obesity (1). Social cost of eating chocolate may exceed social benefit (1) due to external costs (1) example e.g. cost on health service / may reduce need for government spending on healthcare (1) overconsumption of chocolate (1) move market closer to where social benefit equals social cost (1) increase welfare (1). May raise health of the population / eating chocolate may be unhealthy (1) raise labour productivity (1). There may be information failure (1) some chocolate is a demerit good (1). Award up to 4 marks for logical reasons why it should not, which may include: Poor may not be able to afford chocolate (1) regressive measure (1). Not everyone overweight / some may consume chocolate in quantities that are not harmful (1) may cause demand to switch to other high sugar products / discriminate against other high sugar products (1). It will encourage supply to extend (1) a surplus may develop (1). There may be an illegal market in chocolate (1). There may be a cost to the government (1) it may have to pay to monitor that the price is being charged (1) lower tax revenue from chocolate (1) may be an increase in unemployment (1). 1(h) Demand may be inelastic (1) resulting in a relatively small fall in demand / chocolate may be addictive (1). It depends on how high the minimum price is (1) may have no effect if set below the market equilibrium (1).

Question 9

(a) Calculate Australia’s unemployment rate in 2021. [1] (b) Identify two substitutes for coal. [2] (c) Explain one economy of scale that c…

Accepted Answer

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

Question 10

Many people from the Philippines work in another country, often in industries that provide merit goods and public goods. In 2020, the Phili…

Accepted Answer

4(a) Identify two influences on which country a person decides to work in. Two from:  wages / GDP per head  working conditions  job opportunities / job security  qualifications required  family ties  language spoken  immigration restrictions  personal safety/ freedom from persecution  living standards / cost of living  better welfare / healthcare / education provision 2 If more than two influences are given, consider the first three. 4(b) Explain, with examples, the difference between a merit good and a public good. Logical explanation which might include: A merit good e.g. education / fruit (1) is beneficial / is under- consumed / people unaware of benefits / so underproduced without government intervention / government encourage consumption (1). A public good e.g. defence / streetlighting / police / sea defences / roads (1) would not be produced by the private sector / needs to be financed by the government/ non-rival/ non-excludable (1). 4 One mark each for each of two differences identified and one mark each for each of two examples Question Answer Marks Guidance 4(c) Analyse how an increase in government spending could increase life expectancy. Coherent analysis which might include increased government spending on: Healthcare (1) could raise quality / accessibility of healthcare (1). Education (1) may result in people leading healthier lives (1) more exercise (1) better nutrition (1). Benefits (1) may increase access to basic necessities / reduce poverty (1). Green energy (1) may reduce pollution (1). Infrastructure (1) could reduce traffic accidents (1) reduce traffic congestion (1) reduce stress (1). Police (1) reduces deaths through crime (1). Increased government spending (in total) (1) may increase employment / raise income / raise standards of living (1). 6 MAX of three marks for just identifying areas of government spending MAX of three marks for analysis of any single area of spending. One item analysed well MAX 4 marks. Question Answer Marks Guidance 4(d) Discuss whether or not a rise in a country’s foreign exchange rate would benefit its economy. In assessing each answer, use the table opposite. Why it might:  reduce price of imports  this could lower inflation as raw material costs may fall and more competitive pressure for firms to keep price rises low  enables a country to buy more imports for any given quantity of exports  could reduce a current account surplus which may enable more products to be consumed. Why it might not:  increase the price of exports  this could reduce exports and export revenue  economic growth could fall  unemployment could rise  could increase a current account deficit. 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

Question 11

(a) Calculate what percentage of Honduran people did not have access to electricity in 2020. [1] (b) Identify two benefits the Honduran eco…

Accepted Answer

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).

Question 12

In the US, the supply of meat from emus, a large bird, is price-elastic. Recently, US farmers have switched to keeping other livestock and …

Accepted Answer

4(a) Define elastic supply. 2 The percentage change in quantity supplied is greater than the percentage change in price (2). Change in supply is greater than the change in price / PES > 1 (1). 4(b) Explain two reasons why a government may subsidise 4 One mark each for each of two reasons identified and one food production. mark each for each of two explanations. Logical explanation which might include: Increase output (1) overcome a shortage (1). Reduce price / cost (1) help consumers / reduce poverty / give access to a basic necessity / make food more affordable (1). Increase quality (1) improve nutrition / increase health of population / raise life expectancy (1). Increase incomes of farmers / farm workers (1) raise their living standards of farmers / stop farmers going out of business (1). Reduce imports of food / increase exports of food (1) improve the current account of the balance of payments / agriculture is a strategic industry / reduce dependency on other countries for an essential good (1). Increase employment / reduce unemployment (1) help in rural areas (1). 4(c) Analyse what influences a farmer’s demand for labour. 6 Coherent analysis which might include: Demand for the food they produce (1) derived demand / a higher demand for food will encourage farmers to expand their output / employ more workers (1) more profits earned (1). Wage rates (1) the lower the wage rate, the less it will cost to employ workers (1). Skills of workers (1) the more skilled workers are, the more productive they will be (1). Price of other factors of production / costs of production (1) if the price of e.g. agricultural drones falls, demand for labour may fall (1). Productivity of other factors of production (1) advances in technology may result in farm workers being replaced by machinery (1). Type of farming (1) some farming is more labour-intensive / capital-intensive (1). Size of farm (1) large farms likely to employ more (1). Subsidies (1) subsides may encourage a farmer to expand output and employ more workers (1). Seasons (1) demand for labour is likely to be higher during harvesting (1). 4(d) Discuss whether or not people living in cities have a 8 The answer may be from the view of why people living in higher living standard than those living in rural areas. rural areas may have a higher living standard. In assessing each answer, use the table opposite. Level Description Marks Why they might: 3 A reasoned discussion which 6–8 • may be more job opportunities accurately examines both sides of the • may be higher incomes economic argument, making use of • may be more forms of entertainment economic information and clear and • may be shorter distance to schools and shops logical analysis to evaluate economic • may be more access to healthcare facilities issues and situations. One side of the • may be better quality education/ healthcare. argument may have more depth than the other, but overall, both sides of the Why they might not: argument are considered and • may be more traffic congestion developed. There is thoughtful • may be overcrowding evaluation of economic concepts, • air and noise pollution levels may be higher terminology, information and/or data • stress may be high appropriate to the question. The • higher cost of living in cities. discussion may also point out the possible uncertainties of alternative decisions and outcomes. 2 A reasoned discussion which makes 3–5 use of economic information and clear analysis to evaluate economic issues and situations. The answer may lack some depth and development may be one-sided. There is relevant use of economic concepts, terminology, information and data appropriate to the question. 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 0 no creditable content.

Question 13

(a) Calculate Tunisia’s balance on the current account of its balance of payments. [1] (b) Identify two qualities of a good tax that the Tu…

Accepted Answer

1(a) Calculate Tunisia’s balance on the current account of its balance of payments. –$2.4bn 1 Accept –2.4bn. Also accept –6.8 or –6.9 billion TND. 1(b) Identify two qualities of a good tax that the Tunisian government aimed to achieve. Efficiency / efficient / the tax should improve market performance / reduce market failure (1). Economical / economy / the tax should raise more in revenue than it costs to collect it (1). 2 If more than 2 qualities are given, consider the first 3. 1(c) Explain one reason why the Tunisian government regulates the price of flour and milk. Reduce poverty (1) flour and milk are basic necessities / essential products / people may be able to buy enough basic necessities / make them affordable / keep price relatively low (1). Or Prevent monopoly firms exploiting their market power (1) stop the firms raising price to a high level (1). 2 One mark for a reason identified and one mark for an explanation. Question Answer Marks Guidance 1(d) Explain two ways the Tunisian government tried to reduce frictional unemployment. Logical explanation which might include: Increased the labour market information available to workers and employers (1) so workers would be more aware of job vacancies / skills and qualifications required / employers more aware of those seeking jobs / may enable workers to move more quickly/easily between jobs / reduce search time / increase mobility of workers (1). Did not raise unemployment benefit (in line with inflation) (1) so, the purchasing power of unemployment benefit would fall / increase the incentive to work (1). 4 One mark for each of two ways identified and one mark for each of two explanations. If more than 2 ways are given, consider the first 3. Question Answer Marks Guidance 1(e) Analyse the relationship between the change in Tunisia’s average wage and the inflation rate. Relationship (up to 2 marks) Direct relationship / positive relationship (1) as change in the average wage increases so does the inflation rate / if change in average wage / rise in average wage falls so does the inflation rate / both fall and rose together / same trend (1). Evidence (up to 3 marks) 2016 – 2017 / 2018 both the average wage / change in average wage and inflation rate rose (1). Between 2014 – 2018, the average wage rose more rapidly than the inflation rate (1) real wages would have increased between 2014 – 2018 (1). Between 2018 – 2020 / in 2019 – 2020, the inflation rate was higher than the rise in the average wage (1) real wages would have fallen (1). Between 2014 – 2015/2016 / 2018 – 2019/2020 both the change in average wage and inflation rate fell (1). 2018 had the highest rise in the average wage and the highest inflation (1). 2016 had the lowest increase in the inflation rate but not the lowest increase in the average wage / 2020 had the lowest increase in the average wage but not the lowest inflation rate (1). Over the whole period the inflation rate rose while the increase in the average wage fell (1). Explanation (up to 2 marks) A rise in the average wage may increase costs of production / cause cost push inflation / a higher inflation rate will encourage workers to press for a wage rise (1). A rise in the average wage may increase disposable income / consumer expenditure / total demand / cause demand-pull inflation (1). 4 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. Note: average wage did not fall. Question Answer Marks Guidance 1(f) Analyse, using a demand and supply diagram, how an increase in wage costs would affect the market for shoes. Coherent analysis which might include: D&S diagram: Axes correctly labelled – price and quantity or p and q (1). Original demand and supply curves correctly labelled (1). New supply curve shifted to the left (1). Equilibriums – shown by lines P1 and Q1 and P2 and Q2 or equilibrium points marked as E1 and E2 (1). Written analysis: An increase in wage costs would increase costs of production which may raise price (1). 5 Note: higher price needs to be linked to higher costs of production/higher costs/higher wage costs. Question Answer Marks Guidance 1(g) Discuss whether or not the Tunisian government should continue to subsidise electricity production. Award up to 4 marks for logical reasons why it might, which may include:  reduce costs of producing electricity (1) increase supply of electricity (1) lower price of electricity (1) make electricity more affordable / reduce poverty (1)  lower costs of firms that use electricity (1) which may encourage them to expand / attract MNCs / increase output / increase GDP / cause economic growth (1) increase employment / lower unemployment (1)  reduce inflation / firms lower prices (1) make Tunisia’s products more internationally competitive / increase exports / lower imports / improve the current account balance (1)  may reduce pollution / external costs (1) if subsidising green sources of energy (1). Award up to 4 marks for logical reasons why it might not, which may include:  electricity firms may rely on the subsidy (1) may not keep costs low / become inefficient (1) may not pass on the subsidy in the form of lower price (1)  opportunity cost (1) government could spend money on e.g. healthcare (1)  may result in a budget deficit / increase in taxes (1)  may cause pollution / external costs (1) if e.g. coal powered / deplete non-renewable resources (1). 6 Apply this example to all questions with the command word DISCUSS (1g, 1h, 2d, 3d, 4d and 5d) Each point may be credited only once, on either side of an argument, but separate development as to how/why the outcome may differ is rewarded. Generic example Mark Tax revenue may decrease… 1 ...because of reason e.g. incomes may be lower. 1 Tax revenue may increase because incomes may be higher i.e. reverse of a previous argument. 0 Tax revenue may increase because of a different reason i.e. not the reverse of a previous argument e.g. government spending on subsidies may stimulate the economy more than spending on education. 1 Question Answer Marks Guidance 1(h) Discuss whether or not a rise in the value of the Tunisian dinar would benefit the Tunisian economy. Award up to 4 marks for logical reasons why it might, which may include:  may reduce inflation (1) imports would be cheaper (1) enable households to buy more imports / higher purchasing power (1) more choice (1) may lower price of some raw materials and/or capital goods (1) increase competitive pressure on domestic firms (1) lower costs of production (1)  lower total (aggregate) demand (1) which may reduce demand-pull inflation (1)  may be taken as an indicator of a strong economy / increase confidence (1) encourage investment / attract MNCs (1)  if demand for exports is price inelastic, export revenue may rise (1). Award up to 4 marks for logical reasons why it might not, which may include:  higher export prices / may reduce exports / export revenue (1) lower price of imports (1) may increase imports / import expenditure (1) reduce international competitiveness (1) increase the deficit / reduce surplus on the current account of Tunisia’s balance of payments (1)  lower net exports may reduce GDP / economic growth (1) which may increase unemployment / reduce employment (1)  may discourage MNCs / investment (1) because of higher cost of setting up in the country (1). 6 Note: lower total demand may be credited on either side but only once. Note: the generic advice above in terms of MNCs. One mark for attract or discourage MNCs. Another mark could be gained by explaining why they may be attracted and another mark for explaining why they may be discouraged.

Question 14

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 c…

Accepted Answer

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. 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

Question 15

(a) Calculate the percentage of the Jordanian labour force employed in the secondary sector. [1] (b) Identify two components of the current…

Accepted Answer

Question Answer Marks Guidance 1(a) Calculate the percentage of the Jordanian labour force 1 Accept 19. employed in the secondary sector. 19% (1). 1(b) Identify two components of the current account of 2 If more than two suggested components are given, consider Jordan’s balance of payments. the first three. Trade in services (1) primary income (1). Accept invisibles for trade in services. 1(c) Explain the main type of unemployment experienced by 2 Faill in demand is not sufficient here for fall in total demand Jordan in 2020. as total demand is given in the source material – must be macro. Cyclical unemployment (1) lower total demand / fall in employment in most industries / number of workers greater Accept ‘demand deficient unemployment for cyclical than the number of jobs available (1). unemployment. 1(d) Explain two advantages the Jordanian economy may 4 One mark each for each of two advantages identified and gain from the mergers between its tourism firms. one mark for each of two explanations. Logical explanation which might include: Lower prices may be linked to either ‘raise output’ etc. or Lower prices (1) may raise output/GDP/employment/living ‘raise exports’ etc. standards / may be the result of taking advantage of Similarly higher quality may be linked to ‘raise exports etc.’ economies of scale (1). or ‘raise output etc.’. Higher quality (1) may raise exports / reduce current account deficit / increase international competitiveness / increase tourism revenue / more foreign currency / may be the result of sharing ideas (1). 1(e) Analyse the relationship between birth rate and average 4 Responses do not have to be in the format suggested but age. 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 (up to 2 marks): Accept analysis based on how differences in the average of Countries with a low birth rate are likely to have a high population may affect the birth rate. average age (1) an inverse relationship / negative relationship / move in opposite directions (1). For supporting evidence and the second ‘exception’ mark, comparisons must be made. No marks for just stating the Supporting evidence (up to 2 marks): birth rate and average age figures. Four countries with the lowest birth rates had the highest average age (1) Monaco had the lowest birth rate and the highest average age (1) Niger with the highest birth rate has the lowest average age (1) e.g. Germany has a lower birth rate and a higher average age than Jordan (1). Analysis of expected relationship (up to 2 marks): A low birth rate would mean that children would form a small proportion of the population / a high birth rate may mean children would form a high proportion of the population / it would increase the proportion of people aged over 65 (1). A high birth rate may indicate low living standards / lower income which may be associated with low life expectancy (1). A high average age may mean that there are fewer people of child-bearing age (1). Exception (up to 2 marks): Venezuela or Maldives (1) Maldives had a lower birth rate than Venezuela but the same average age (1). Analysis of exception (up to 1 mark): The average age of a country’s population is also influenced by the death rate and net migration (1). 1(f) Analyse, using a demand and supply diagram, how an 5 increase in population size will affect the market for clothing. Coherent analysis which might include: 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 right (1). Equilibriums – shown by lines P1 and Q1 and P2 and Q2 or equilibrium points marked as E1 and E2 (1). Written analysis: An increase in population size will increase the number of consumers / increase demand for clothes / price increases (1). 1(g) Discuss whether or not the Jordanian government 6 Apply this example to all questions with the command should spend more on renewable energy. word DISCUSS (1g, 1h, 2d, 3d, 4d and 5d) Award up to 4 marks for logical reasons why it should, which may include: Each point may be credited only once, on either side of an • need for more energy due to an increase in population argument, but separate development as to how/why the (1) non-renewable sources of energy will run out / outcome may differ is rewarded. reduced dependency on fossil fuels (1) may reduce import bills (1) Generic example mark • would reduce environmental damage (1) reduce external costs (1) lower pollution (1) reduce extent of Tax revenue may decrease… 1 climate change / global warming / promote sustainable development (1) improve health (1). ...because of reason e.g. incomes may be 1 • cheaper in the longer run (1) solar and wind power are lower. free goods (1) lower costs of production (1) reduce household bills (1). Tax revenue may increase because incomes 0 may be higher i.e. reverse of a previous Award up to 4 marks for logical reasons why it should not, argument. which may include: • expensive to build (1) opportunity cost (1) example (1) Tax revenue may increase because of a 1 • relies on weather (1) supplies may be disrupted / different reason i.e. not the reverse of a insufficient / unreliable (1) previous argument e.g. government spending • cost of renewable energy projects may increase with on subsidies may stimulate the economy more high interest than spending on education. • rates (1) may be funded by borrowing (1) may increase taxes (1) • may cause visual pollution (1) e.g. wind turbines (1). 1(h) Discuss whether or not the Jordanian central bank 6 Some points e.g. discouraged spending may be considered should have raised the rate of interest in 2021. from either side but see guidance table on 1f. Award up to 4 marks for logical reasons why it should have, which may include: • total demand predicted to increase / may have reduced total demand (1) encouraged saving (1) discouraged spending / borrowing (1) lowered demand-pull (1) inflation (1) reduced imports (1) • may have attracted more funds for the Jordanian government to borrow / use (1) for e.g. renewable energy projects (1). Award up to 4 marks for logical reasons why it should not have, which may include: • cost of government borrowing would have increased / may have difficulty paying off government debt (1) • investment may have been discouraged (1) lowered economic growth (1) reduced growth in employment / caused unemployment (1) • may have increased the exchange rate (1) foreigners depositing money in the country’s banks / attracted hot money flow (1) raised export prices / lowered import prices / decreased exports / increased imports (1) reduced tourism (1) increased the current account deficit (1).

Question 16

(a) Calculate the value of Gabon’s oil production as a percentage of Gabon’s GDP. [1] (b) Identify two external benefits of rainforests. [2…

Accepted Answer

Question Answer Marks Guidance 1(a) Calculate the value of Gabon’s oil production as a 1 Accept 30 without %. percentage of Gabon’s GDP. 30% 1(b) Identify two external benefits of rainforests. 2 If more than two benefits given, consider the first three. Two from: • reduce air pollution / pollution / improves air quality (1) • protect against floods (1) • prevent soil erosion (1). 1(c) Explain what effect an increase in tourism may have on 2 No marks for simply saying current account of the balance of Gabon’s current account of the balance of payments. payments increases. • Increase in exports (1) • increase trade in services (invisible) surplus / reduces deficit (1) • Improves the current account balance surplus / reduces deficit (1). 1(d) Explain two reasons why the Gabonese Government 4 One mark each for each of two reasons identified and one wants to reduce reliance on oil. mark each for each of two explanations. Logical explanation which might include: Only these two reasons are acceptable. • Running out of oil / create a shortage (1) revenue from the industry will decline / employment in the industry will decline / GDP will decline /cause recession / conserve for future generations / may need to import oil / price for oil may rise (1). • Oil industry creates water pollution / pollution (1) an external cost / harms health / reduces standard of living / protect the environment / attract tourists (1). 1(e) Draw a demand and supply diagram to show the effect 4 of the discovery of new gold deposits on the market for gold. Coherent analysis which might include: D&S diagram: Axes correctly labelled – price and quantity or p and q (1). Original demand and supply curves correctly labelled (1). New supply curve shifted to the 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 literacy rate and 5 Responses do not have to be in the format suggested but the percentage of the labour force employed in they should address the expected/normal relationship, offer agriculture. supporting evidence of that, highlight any exceptions to that, and analyse the overall data. Coherent analysis which might include: Supporting evidence should involve interpretation, not just Expected relationship: description. Simply stating percentages without analysis of • Generally, an inverse / negative relationship (1) the being high or low gets no marks. higher the literacy rate, the smaller the % of the labour force employed in agriculture (1). Accept as analysis where two countries with different levels of adult literacy and percentage employed in agriculture are Supporting evidence: directly compared. • South Africa had the highest literacy rate and the lowest % of the labour force employed in agriculture (1). • Zambia / Sierra Leone / Mali had the lowest literacy rates and the highest %s of labour force employed in agriculture (1). Analysis of expected relationship: • A high literacy rate may increase the chance of workers gaining jobs in high paid tertiary jobs (1) a low literacy rate may mean workers have to undertake unskilled jobs in agriculture / a high proportion of workers employed in agriculture may mean that high literacy rate is not required (1). Exception: • Gabon (1) Gabon has a high literacy rate but also a high % of the labour force employed in agriculture (1). Analysis of exception: • Some jobs in agriculture are skilled / secondary and tertiary sectors may be small (1). 1(g) Discuss whether or not a government should pay 6 Apply this example to all questions with the command private sector firms to give work experience to word DISCUSS unemployed young people. (1(g), 1(h), 2(d), 3(d), 4(d) and 5(d)) Award up to 4 marks for logical reasons why it should, Each point may be credited only once, on either side of an which may include: argument, but separate development as to how/why the outcome may differ is rewarded. • can enable young workers to develop their skills / raise their productivity (1) increase their confidence / Generic example mark motivation to get a job / get higher paid jobs (1) young people may make mistakes and cost firm money while Tax revenue may decrease 1 being trained (1) • can increase the chances of young people gaining a job because of reason e.g. incomes may be lower. 1 (1) reduce unemployment (1) reduce the cost of unemployment benefits (1) reduce future training costs Tax revenue may increase because incomes 0 (1) increase tax revenue (1) leads to economic growth may be higher i.e. reverse of a previous (1). argument. Award up to 4 marks for logical reasons why it should Tax revenue may increase because of a 1 not, which may include: different reason i.e. not the reverse of a previous argument e.g. government spending • the quality of the work experience may not be good (1) on subsidies may stimulate the economy more the young may be given unskilled jobs (1) poor working than spending on education. conditions / not regulated (1) • opportunity cost [implied] (1) government spending could be used to e.g. improve state education (1) government incurs additional expenditure / raises taxes to pay for it (1) the young may have been employed by the private sector without payment by the government (1) • it may reduce the efficiency of private firms (1) reduce their output (1) firms may be corrupt (1). 1(h) Discuss whether or not a growth in the size of firms in 6 Maximum of 2 marks for just listing different types of Gabon’s textile industry will reduce their average cost economies and diseconomies of scale or just stating of production. economies of scale and diseconomies of scale may be experienced without references to examples. Award up to 4 marks for logical reasons why it might, which may include: Essentially full marks can be gained for identification and explanation of two economies of scale and one diseconomy • labour economies (1) workers can specialise / increase of scale OR one economy of scale and two diseconomies of labour productivity (1) scale. • managerial economies (1) employ specialists (1) • technical economies (1) using advanced capital Note there is no marks awarded for simply stating that equipment (1) average costs may or rise or for drawing a diagram showing • buying / purchasing economies (1) receiving a discount average costs changing as a firm grows in size. as buying in bulk (1) • selling economies (1) reducing transport costs (1) • marketing economies (1) spreads fixed costs over more output (1) • financial economies (1) easier / cheaper to borrow (1) • research and development economies (1) introduce new products / new production methods (1) • risk bearing economies (1) able to suffer fall in demand for one product or supply problems connected to one product (1) • may experience external economies of scale (1) example (1). Award up to 4 marks for logical reasons why it might not, which may include: • difficulty of controlling a large firm (1) may be slower to make decisions (1) 1(h) • communication problems (1) may be more difficult to 6 keep everyone informed (1) • poor industrial relations (1) may be less contact between managers and workers / decreasing productivity (1).

Question 17

In recent years, the quantity of Latvia’s factors of production has changed. Since 2008, its capital has increased and its land has not cha…

Accepted Answer

3(a) Identify the rewards to capital and land. 2 If just names the two rewards, they can be in any order. • Interest (1) • rent (1) 3(b) Explain two causes of a decrease in enterprise in an 4 One mark each for each of two causes identified and one economy. mark each for each of two explanations. Logical explanation which might include: If more than two causes given, consider the first three. • Decrease in profit / increase in corporate income MAX of two marks if not identifying what changes. (corporation) tax (1) increase in interest rates for borrowing (1) reduce financial incentive to become an entrepreneur (1). • Reduction in education (1) reduce those with the skills to become entrepreneurs (1). • Reduction in immigration / reduction in population (1) reduce the number of people who can become entrepreneurs (1). • Entrepreneurs move abroad (1) better prospects / less tax (1). • Reduction in the retirement age (1) reduces supply of potential entrepreneurs (1). • Recession / war (1) firms may go out of business / reduces willingness to take risks / reduces confidence / certainty (1). • Increased government regulation (1) excessive rules may discourage entrepreneurs (1). • Nationalisation of an industry / growth of monopolies (1) removal of entrepreneurs (1). 3(c) Analyse how changes in conditions of supply can affect 6 Only allow one mark for reference to a rise in price and one a firm’s prices. mark for reference to a fall in price. Coherent analysis which might include: MAX 4 marks if not identifying change in conditions of supply. • Increase in costs of production (1) due to rise in wages / raw material costs / capital goods costs / tariffs (1) raise price (1) to maintain profit (1). • Natural disasters (1) can create a shortage (1) raise price (1). • Changes in weather (1) good weather can create a surplus in supply e.g. agriculture (1) prices fall (1) or poor weather can create a shortage (1) prices rise (1) • Increase in indirect tax / corporate income (corporation) tax (1) a firm may pass this onto consumers as higher prices (1) especially if demand is inelastic (1). • Government subsidies to firms (1) reduce the cost of production (1) the firm may be able to gain the same revenue and profit (1) with a lower price (1). • Discovery of new source of raw materials (1) enabling the firm to supply (1) more at a lower price (1). • Advances in technology (1) example (1) could lower costs of production (1) reducing price (1). • Improvements in education and training (1) raise productivity (1) lower prices (1). 3(d) Discuss whether or not a rise in a national minimum 8 Accurate diagram can achieve Level 1. wage will harm an economy. Level Description Marks In assessing each answer, use the table opposite. 3 A reasoned discussion which accurately 6–8 Why it might: examines both sides of the economic • increase unemployment if firms cannot afford to pay argument, making use of economic higher wages information and clear and logical • higher unemployment would reduce total demand analysis to evaluate economic issues • lower total demand would reduce output and situations. One side of the • tax revenue may fall, and expenditure on state benefits argument may have more depth than may rise the other, but overall both sides of the • if higher wages are paid, there may be inflation. argument are considered and developed. There is thoughtful Why it might not: evaluation of economic concepts, • reduce poverty as raise the income of the low-paid terminology, information and/or data • encourage more people to enter the labour force appropriate to the question. The • increase productivity as workers may be more discussion may also point out the motivated possible uncertainties of alternative • encourage firms to train workers to gain better return decisions and outcomes. • may be set below the existing equilibrium wage level. 2 A reasoned discussion which makes 3–5 use of economic information and clear analysis to evaluate economic issues and situations. The answer may lack some depth and development may be one-sided. There is relevant use of economic concepts, terminology, information and data appropriate to the question. 3(d) 8 Level Description Marks 1 There is a simple attempt at using 1–2 economic definitions and terminology. Some reference may be made to economic theory, with occasional understanding. 0 A mark of zero should be awarded for 0 no creditable content.

Question 18

In 2023, India became the country with the largest population. This may affect the government’s macroeconomic aims. In 2018, the Indian Gov…

Accepted Answer

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

Question 19

In April 2023, a French cosmetics firm merged with an Australian cosmetics firm. It is expected the merger will lower average total cost as…

Accepted Answer

3(a) Define average total cost. 2 Total cost divided by output (2). Cost per unit (1). 3(b) Explain how using renewable raw materials may affect a 4 A simple statement that profits rise or fall with no relevant firm’s profits. explanation is 0 marks. Logical explanation which might include the following. Profits rising and profits falling can both be credited if each is explained. • Using renewable resources may be more expensive (1) increase costs of production (1) reduce profits (1). • Can advertise that renewable resources which create less pollution / improve environmental sustainability are being used (1) increase image of the firm (1) raise demand (1) increase profits (1). • Using renewable resources may be subsidised (1). May become cheaper to use renewable resources in the long run (1). • Resources will not be depleted / firms have a constant supply of raw materials (1) raise profits (1). 3(c) Analyse the internal economies of scale that a 6 Maximum of 3 marks for a list of different types of internal cosmetics firm could experience. economies of scale with no development / explanation. Coherent analysis which might include the following. • Buying / purchasing economies (1) buy ingredients in bulk at a discount (1). • Labour economies (1) workers specialising e.g. designing the packaging (1). • Managerial economies (1) e.g. specialist human resource manager (1). • Technical economies (1) advanced technology could be used to produce perfume (1). • Financial economies (1) the firm finding it cheaper / easier to borrow from banks (1). • Research and development economies (1) develop new perfumes (1). • Selling / marketing economies (1) lower average advertising costs (1). • Risk-bearing economies (1) selling perfume in more markets (1). 3(d) Discuss whether or not perfume should be taxed at a 8 Level Description Marks higher rate than food. 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 should: information and clear and logical • perfume is a luxury whereas food is a necessity analysis to evaluate economic issues • rich spend more on perfume than the poor and situations. One side of the • taxing food more may increase poverty as poor spend a argument may have more depth than high proportion of their income on food the other, but overall, both sides of the • perfume is less likely than food to be a merit good argument are considered and • a higher price for perfume will not significantly contribute developed. There is thoughtful to inflation, not a significant item in CPI evaluation of economic concepts, • perfume may be imported while food may be supplied terminology, information and/or data by domestic firms. appropriate to the question. The discussion may also point out the Why it should not: possible uncertainties of alternative • demand for perfume may be elastic and so may not decisions and outcomes. raise much revenue. In contrast, inelastic demand for food so may raise high tax revenue 2 A reasoned discussion which makes 3–5 • perfume may be an important domestic industry. Higher use of economic information and clear taxes may result in closure / unemployment analysis to evaluate economic issues • some food is a demerit good e.g. food with a high sugar and situations. The answer may lack content some depth and development may be • taxing demerit food may improve health one-sided. There is relevant use of • taxing food may reduce obesity. economic concepts, terminology, information and data appropriate to the question. 3(d) Level Description Marks 1 There is a simple attempt at using 1–2 economic definitions and terminology. Some reference may be made to economic theory, with occasional understanding. 0 A mark of zero should be awarded for 0 no creditable content.

Question	Answer	Marks	From
1	see sheet	30	0987/21 May/June 2020
2	see sheet	20	0987/21 May/June 2020
3	see sheet	20	0987/22 May/June 2020
4	see sheet	20	0987/22 Oct/Nov 2020
5	see sheet	30	0987/22 May/June 2021
6	see sheet	20	0987/22 May/June 2021
7	see sheet	20	0987/21 May/June 2022
8	see sheet	30	0987/22 Oct/Nov 2022
9	see sheet	30	0987/21 May/June 2023
10	see sheet	20	0987/21 May/June 2023
11	see sheet	30	0987/22 Oct/Nov 2023
12	see sheet	20	0987/22 Oct/Nov 2023
13	see sheet	30	0987/22 May/June 2024
14	see sheet	20	0987/22 May/June 2024
15	see sheet	30	0987/22 Oct/Nov 2024
16	see sheet	30	0987/21 May/June 2025
17	see sheet	20	0987/21 May/June 2025
18	see sheet	20	0987/21 May/June 2025
19	see sheet	20	0987/22 Oct/Nov 2025

Government macroeconomic intervention — Paper 2 · IGCSE Economics (9-1) 0987

Questions7 pages

Mark scheme19 answers

Another paper, or another topic

Questions as text

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Q4 · The population of Hungary is the most obese in Europe 0987/22 Oct/Nov 2020

Q5 · Calculate Chile’s agricultural output in 2017 0987/22 May/June 2021

Q6 · Nearly one million people in Cairo, the capital city of Egypt, live in crowded, unhealthy… 0987/22 May/June 2021

Q7 · Trade union membership is much higher in Sweden than in most countries 0987/21 May/June 2022

Q8 · Calculate how many dollars 6400 Nigerian naira would have bought in 2019 0987/22 Oct/Nov 2022

Q9 · Calculate Australia’s unemployment rate in 2021 0987/21 May/June 2023

Q10 · Many people from the Philippines work in another country, often in industries that… 0987/21 May/June 2023

Q11 · Calculate what percentage of Honduran people did not have access to electricity in 2020 0987/22 Oct/Nov 2023

Q12 · In the US, the supply of meat from emus, a large bird, is price-elastic 0987/22 Oct/Nov 2023

Q13 · Calculate Tunisia’s balance on the current account of its balance of payments 0987/22 May/June 2024

Q14 · In 2020, wages paid to Mexican workers, including those in the primary sector, fell 0987/22 May/June 2024

Q15 · Calculate the percentage of the Jordanian labour force employed in the secondary sector 0987/22 Oct/Nov 2024

Q16 · Calculate the value of Gabon’s oil production as a percentage of Gabon’s GDP 0987/21 May/June 2025

Q17 · In recent years, the quantity of Latvia’s factors of production has changed 0987/21 May/June 2025

Q18 · In 2023, India became the country with the largest population 0987/21 May/June 2025

Q19 · In April 2023, a French cosmetics firm merged with an Australian cosmetics firm 0987/22 Oct/Nov 2025