Economic growth — Paper 2 · IGCSE Economics (9-1) 0987

1 (a) Calculate Pakistan’s trade in goods balance in 2017. [1] (b) Identify two possible causes of demand-pull inflation in Pakistan in 2017. [2] (c) Explain the opportunity cost to Pakistan of producing consumer goods. [2] (d) Explain two reasons why education is a merit good. [4] (e) Analyse why the children of poor families tend to receive less education than the children of rich families. [4] (f) Analyse the relationship between GDP per head and imports per head. [5] (g) Discuss whether or not the supply of teachers in Pakistan is likely to increase in the future. [6] (h) Discuss whether or not an increase in its import tariffs would be likely to benefit the Pakistani economy. [6]

30 marks

Mark scheme: Question Answer Marks 1(a) Calculate Pakistan’s trade in goods balance in 2017. 1 –$36.5bn (1). 1(b) Identify two possible causes of demand-pull inflation in Pakistan in 2 2017. Any two from: Higher government spending (1) higher consumer spending / rising population (1) increased investment (1). 1(c) Explain the opportunity cost to Pakistan of producing consumer 2 goods. Logical explanation which might include: Capital goods (1) resources that could have been used to produce capital goods are being used to produce consumer goods / (next) best alternative forgone (1). 1(d) Explain two reasons why education is a merit good. 4 Logical explanation which might include: People underestimate full benefit / private benefit (1) not appreciating health and job opportunity benefits (1). People not taking into account external benefits (1) e.g. better quality products/larger quantity of products or economic growth (1). 1(e) Analyse why the children of poor families tend to receive less 4 education than the children of rich families. Coherent analysis which might include: The children of the poor may not attend school (1) they may have to work (1) to help support their families (1). Poor families are likely to have difficulty paying to have their children educated (1) some schools in Pakistan are in the private sector (1) there seems to be a lack of low-cost schools (1). The children of the poor may leave school at a younger age (1) may miss more school days due to ill health (1). 1(f) Analyse the relationship between GDP per head and imports per head. 5 Coherent analysis which might include: Generally the countries with the highest GDP per head spend the most per head on imports (1) examples e.g. Norway has the highest income per head and the highest spending on imports per head and Haiti has the lowest income and the lowest spending on imports (up to 2) exception: Russia has a higher income per head than Mexico but a lower spending per head on imports (1). Expected relationship as income rises (1) people can afford more imports (1). The four countries with above average GDP per head spend above the global average on imports (1). The two countries with below average GDP per head spend more on imports (1). 1(g) Discuss whether or not the supply of teachers in Pakistan is likely to 6 increase in the future. Generic example mark Tax revenue may decrease… 1 ...because of reason e.g. incomes may be lower. 1 Tax revenue may increase because incomes may be higher i.e. 0 reverse of a previous argument. Tax revenue may increase because of a different reason i.e. not the reverse of a previous argument e.g. government spending on 1 subsidies may stimulate the economy more than spending on education. Award up to 4 marks for logical reasons why it might, which may include: • education standards may rise (1) which may increase those qualified to be teachers (1) • working conditions may improve (1) with better buildings (1) • population is increasing (1) which may increase the size of the labour force (1). Award up to 4 marks for logical reasons why it might not, which may include: • wages may not rise (1) teachers may switch to other jobs (1) • teachers may emigrate to other countries (1) • the qualifications required to be a teacher may increase (1) by more than educational standards rise (1). 1(h) Discuss whether or not an increase in its import tariffs would be likely 6 to benefit the Pakistani economy. Award up to 4 marks for logical reasons why it might, which may include: • may reduce the trade deficit (1) by reducing demand for imports (1) • tax revenue may increase (1) enabling the government to increase its spending (1) • may help protect infant industries (1) until they can take advantage of economies of scale (1). Award up to 4 marks for logical reasons why it might not, which may include: • demand for some finished imports may be price inelastic (1) • demand for capital goods / raw materials may be inelastic (1) • incomes may rise (1), leading to higher spending on imports (1) • other countries may impose trade restrictions (1) reducing Pakistan’s ability to export (1).

This question in 0987/22 May/June 2020

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

20 marks

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

This question in 0987/22 Oct/Nov 2020

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

20 marks

Mark scheme: 2(a) Define foreign exchange rate. The price / value of a currency (1) in terms of another currency / currencies (1). 2 2(b) Explain two reasons why the value of a country’s exports may be greater than the value of its imports. Logical explanation which might include: Price of exports may be lower than price of other countries’ products (1) due to e.g., devaluation / depreciation / weaker currency / higher productivity / lower inflation (1). Quality of exports may be higher than the quality of other countries’ products (1) due to e.g., more investment / better education / specialisation (1). Incomes abroad may have increased (1) enabling foreigners to buy more of the country’s products (1). Protective measures (1) restrict imports / subsidise domestic firms or exports (1). May have high value exports e.g., oil (1) with high (global) demand (1). Recession / low demand at home (1) results in fewer imports / encourages firms to export (1). 4 One mark for each of two reasons identified and one mark for each explanation. Question Answer Marks Guidance 2(c) Analyse how an increase in income tax can affect a country’s inflation rate. One mark for a simple explanation that an increase in income tax can reduce the rate of inflation Coherent analysis which might include: An increase in income tax will reduce disposable income / purchasing power (1) this may reduce consumer spending (1) lower total demand (1) this may encourage firms to reduce prices / reduce price rises (1) lower demand-pull inflation (1). Increase in income tax may encourage workers to press for wage rises (1) increase costs of production (1) cause cost-push inflation (1). Income tax revenue can be used to provide e.g., subsidies to certain goods and services (1) reducing prices (1). 6 Question Answer Marks Guidance 2(d) Discuss whether or not governments should aim for a high rate of economic growth. In assessing each answer, use the table opposite. Why it should:  economic growth can raise incomes  higher incomes can raise living standards  economic growth can reduce unemployment  economic growth can increase tax revenue allowing the government to spend more on e.g., education. Why it should not:  may deplete non-renewable resources which can reduce future growth  may result in pollution  may put other demands on workers who may have to work long hours  may lead to a deficit on current account of the balance of payment  may result in greater inequality  risk of inflation 8 Level Description Marks 3 A reasoned discussion which accurately examines both sides of the economic argument, making use of economic information and clear and logical analysis to evaluate economic issues and situations. One side of the argument may have more depth than the other, but overall, both sides of the argument are considered and developed. There is thoughtful evaluation of economic concepts, terminology, information and / or data appropriate to the question. The discussion may also point out the possible uncertainties of alternative decisions and outcomes. 68 2 A reasoned discussion which makes use of economic information and clear analysis to evaluate economic issues and situations. The answer may lack some depth and development may be one- sided. There is relevant use of economic concepts, terminology, information and data appropriate to the question. 35 Question Answer Marks Guidance 2(d) Level Description Marks 1 There is a simple attempt at using economic definitions and terminology. Some reference may be made to economic theory, with occasional understanding. 12 0 A mark of zero should be awarded for no creditable content. 0

This question in 0987/21 May/June 2022

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

30 marks

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

This question in 0987/22 May/June 2022

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

20 marks

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

This question in 0987/22 Oct/Nov 2022

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

30 marks

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

This question in 0987/21 May/June 2023

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

30 marks

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

This question in 0987/22 May/June 2023

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

20 marks

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

This question in 0987/21 May/June 2024

3 The central bank of Madagascar intervenes in the country’s foreign exchange market. However, Madagascar has a largely market economic system. Nearly 70% of Madagascar’s population live in poverty. Most of the country’s industries are labour-intensive. In 2020, Madagascar had an economic growth rate of 6% and a deficit on the current account of its balance of payments of $0.6bn. (a) Define foreign exchange market. [2] (b) Explain two reasons why a firm may adopt labour-intensive production. [4] (c) Analyse how the macroeconomic aims of economic growth and balance of payments stability may conflict. [6] (d) Discuss whether or not a high level of poverty is likely to exist in a market economic system. [8]

20 marks

Mark scheme: 3(a) Define foreign exchange market. 2 An arrangement / place (1) where different countries’ currencies are bought/demanded (1) and sold/supplied (1) one currency is exchanged for another currency (1). 3(b) Explain two reasons why a firm may adopt labour- 4 One mark each for each of two reasons identified and one intensive production. mark for each of two explanations. Logical explanation which might include: • Labour may be low in price / wages may be low (1) which might make labour cheaper than capital / there may be a high supply of labour (1). • Labour may be very productive / efficient (1) which can make employment profitable / result in low costs of production (1). • The government may subsidise the employment of workers (1) to reduce unemployment (1). • The firm may provide personal services (1) with individual attention (1). • Labour may be more creative / adaptable / provide feedback (1) produce high quality products / improve methods of production (1) • Labour may be unskilled / low level of education (1) unable to use high-tech capital equipment (1). 3(c) Analyse how the macroeconomic aims of economic 6 growth and balance of payments stability may conflict. Coherent analysis which might include: Economic growth may increase employment (1) increase wages / incomes / purchasing power (1) this may increase imports (1). Higher consumer spending (1) may encourage firms to switch products to the domestic market (1) reduce exports (1) increase / cause a current account deficit (1). To produce more goods and services, firms may import more raw materials (1) capital goods (1). Economic growth may result in inflation (1) which would make domestic products less price competitive (1). Economic growth may deplete resources (1) increase need for imports (1). Economic growth may be export-led (1) may be achieved by restricting imports (1) result in a current account surplus (1). Migrant workers may send more money home (1). Export-led growth may increase the exchange rate (1) which may increase imports / reduce exports (1). 3(d) Discuss whether or not a high level of poverty is likely 8 Level Description Marks to exist in a market economic system. 3 A reasoned discussion which 6–8 In assessing each answer, use the table opposite. accurately examines both sides of the economic argument, making use of Why it might: economic information and clear and • may be unemployment logical analysis to evaluate economic • lack of welfare benefits issues and situations. One side of the argument may have more depth than • likely to be income inequality the other, but overall both sides of the • merit goods including healthcare and education may be argument are considered and under-consumed and so underproduced developed. There is thoughtful • monopolies may develop resulting in higher prices. evaluation of economic concepts, terminology, information and/or data Why it might not: appropriate to the question. The • competition / profit motive may result in low prices discussion may also point out the • efficiency is encouraged which can result in high wages possible uncertainties of alternative and high employment decisions and outcomes. • greater response to changes in consumer demand, may increase economic growth 2 A reasoned discussion which makes 3–5 • countries with efficient private sector firms may have use of economic information and clear relative poverty but low absolute poverty. analysis to evaluate economic issues and situations. The answer may lack some depth and development may be one-sided. There is relevant use of economic concepts, terminology, information and data appropriate to the question. 1 There is a simple attempt at using 1–2 economic definitions and terminology. Some reference may be made to economic theory, with occasional understanding. 0 A mark of zero should be awarded for 0 no creditable content.

This question in 0987/22 Oct/Nov 2024

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

20 marks

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

This question in 0987/22 Oct/Nov 2024

1 (a) Calculate foreign workers as a percentage of Japan’s labour force in 2022. [1] (b) Identify two reasons why Japan has a high average age of population. [2] (c) Explain why some young Japanese people emigrate. [2] (d) Explain two ways Japan could attract more foreign workers. [4] (e) Draw a demand and supply diagram to show the effect of a decrease in population on the market for furniture. [4] (f) Analyse the relationship between global GDP per head and global air passenger numbers. [5] (g) Discuss whether or not a high savings rate is likely to benefit Japan. [6] (h) Discuss whether or not labour mobility in Japan is likely to increase in the future. [6]

30 marks

Mark scheme: Question Answer Marks Guidance 1(a) Calculate foreign workers as a percentage of Japan’s 1 Accept 2.5 without %. labour force in 2022. 2.5% (1). 1(b) Identify two reasons why Japan has a high average age 2 If more than two reasons are given, consider the first three. of population. Low birth rate (1) high life expectancy (1) good healthcare (1) young adults moving abroad (1). 1(c) Explain why some young Japanese people emigrate. 2 One mark for identification and one mark for explanation. To gain high wages (1) enjoy a better living standard / able to purchase more goods and services (1). 1(d) Explain two ways Japan could attract more foreign 4 One mark each for two ways identified and one mark each workers. for two explanations. Logical explanation which might include: If more than two ways are given, consider the first three. Only the 3 listed identifications can be credited, and • remove the Japanese language test (1) more foreigners explanation marks can only be awarded if applied to a valid would be able to work in the country (1) identification. • allow foreign workers to bring their families with them (1) foreign workers are more likely to settle in the country if they are not separated from their families (1) • allow unskilled workers to stay for more than five years (1) if gain high wages / enjoy living in the country would not want to leave / attract workers who want to live permanently in the country / give workers the opportunity to stay permanently / increase international mobility of labour (1). 1(e) Draw a demand and supply diagram to show the effect 4 of a decrease in population on the market for furniture. Coherent analysis which might include the following. D&S diagram: Axes correctly labelled – price and quantity or p and q (1). Original demand and supply curves correctly labelled (1). New demand curve shifted to the left (1). OR New supply curve shifted to the left (1). OR New demand curve shifted to the left AND new supply curve shifted to the left. 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 global GDP per head 5 Responses do not have to be in the format suggested but and global air passenger numbers. they should address the expected / normal relationship, offer supporting evidence of that, highlight any exceptions to that, Coherent analysis which might include the following. and analyse the overall data. Expected relationship: Supporting evidence should involve interpretation, not just Generally, a positive relationship (1) the higher the global description. GDP head, the higher the air passenger numbers (1). Supporting evidence: 2016–2019 GDP per head rose and air passenger numbers increased (1). Analysis of expected relationship: Higher GDP per head increases purchasing power / ability to pay for air travel (1) as people get richer, they travel more for leisure and business (1). Exception: 2021 (1) GDP per head rose but air passenger numbers decreased (1). Analysis of exception: May have been a time delay in people gaining confidence in flying after COVID-19 pandemic / other influences on demand e.g. air fares (1). 1(g) Discuss whether or not a high savings rate is likely to 6 Reference to AD / total demand falling can be credited on benefit Japan. either side of the argument, but only once. Award up to 4 marks for logical reasons why it might, which Apply this example to all questions with the command may include: word DISCUSS (1g, 1h, 2d, 3d, 4d and 5d) • may keep inflation low (1) as spending will not be high (1) reduce (total) demand (1) reduce demand-pull Each point may be credited only once, on either side of an inflation (1) argument, but separate development as to how / why the • may reduce imports (1) improve the current account of outcome may differ is rewarded. the balance of payments (1) • provide finance for investment (1) firms able to borrow Generic example mark from banks (1) • may enable households to finance future expenditure Tax revenue may decrease… 1 (1) on e.g. healthcare / education / provide for retirement / provide support for individuals in difficult ...because of reason e.g. incomes may be lower. 1 times (1) • may enable government to cut benefits, e.g. pensions Tax revenue may increase because incomes 0 (1) spend money saved on other priorities, e.g. may be higher i.e. reverse of a previous healthcare (1). argument. Award up to 4 marks for logical reasons why it might not, Tax revenue may increase because of a different 1 which may include: reason i.e. not the reverse of a previous argument e.g. government spending on subsidies • may lower total demand (1) reduce GDP (1) increase may stimulate the economy more than spending unemployment (1) cyclical unemployment (1) could on education. cause a recession (1) • may reduce investment as demand is low (1) reduce improvements in technology (1) • Less indirect tax raised (1) may lead to reduced government spending (1). 1(h) Discuss whether or not labour mobility in Japan is likely 6 Reference to occupational and geographical mobility can be to increase in the future. credited on either side of the argument, but only once. Award up to 4 marks for logical reasons why it might, which Reference to falling house prices or improved transport must may include: be linked to improved mobility for credit and vice versa. • Improvements in education and training (1) could increase skills / qualifications (1) increase occupational mobility (1) • Improvements in transport / subsidised travel (1) could enable people to move to different areas (1) raise geographical mobility (1). Award up to 4 marks for logical reasons why it might not, which may include: • Ageing population (1) may have out-of-date skills (1) more difficult to change jobs (1) reduce occupational mobility (1) may be more reluctant to move to a different area (1) reason (1) reduce geographical mobility (1) • House prices may rise (1) making it difficult to move from areas with low house prices to areas with high prices (1).

This question in 0987/22 Oct/Nov 2025