Total marks: 90 · Duration: 135 minutes
Instructions to candidates
- Answer all questions in both Section A and Section B.
- Write your answers in the spaces provided on the question paper.
- A calculator may be used.
- The number of marks is given in brackets [ ] at the end of each question or part question.
- The total number of marks for this paper is 90.
- Section A carries 54 marks and Section B carries 36 marks.
Paper
Section A — Structured Questions (54 marks)
Question 1
India has experienced rapid economic growth in recent years. The table below shows selected economic data for India.
| Year | Real GDP growth (%) | Unemployment rate (%) | Inflation rate (%) | HDI |
|---|---|---|---|---|
| 2019 | 4.2 | 5.3 | 4.8 | 0.645 |
| 2020 | -7.3 | 8.0 | 6.2 | 0.643 |
| 2021 | 8.7 | 7.1 | 5.5 | 0.633 |
| 2022 | 7.2 | 6.5 | 6.7 | 0.633 |
(a) Define the term 'economic growth'. [2 marks]
(b) Calculate the percentage point change in India's unemployment rate between 2020 and 2022. [1 mark]
(c) Explain two reasons why India's Real GDP growth was negative in 2020. [4 marks]
(d) Analyse how economic growth might affect the standard of living in a developing country such as India. [6 marks]
Question 2
The government of Country X is considering imposing an indirect tax on sugary drinks to reduce consumption and raise tax revenue. The table below shows the market for sugary drinks before the tax is imposed.
| Price per litre | Quantity demanded (million litres) | Quantity supplied (million litres) |
|---|---|---|
| 1.00 dollar | 800 | 200 |
| 1.50 dollars | 650 | 350 |
| 2.00 dollars | 500 | 500 |
| 2.50 dollars | 350 | 650 |
| 3.00 dollars | 200 | 800 |
(a) Using the table, state the equilibrium price of sugary drinks. [1 mark]
(b) Define the term 'indirect tax'. [2 marks]
(c) Explain two reasons why a government might impose a tax on sugary drinks. [4 marks]
(d) Discuss whether imposing a tax on sugary drinks is an effective way to reduce their consumption. [6 marks]
Question 3
The table below shows information about the labour force in Country Y.
| Category | Number of people (millions) |
|---|---|
| Employed | 42.5 |
| Unemployed | 2.5 |
| Population of working age | 60.0 |
(a) Calculate the unemployment rate in Country Y. Show your working. [2 marks]
(b) Identify two groups of people who might be classified as economically inactive. [2 marks]
(c) Explain how cyclical unemployment differs from structural unemployment. [4 marks]
(d) Analyse the likely effects of rising unemployment on an economy. [6 marks]
Question 4
Extract: The Chinese car manufacturer BYD expands into European markets
BYD, China's largest electric vehicle manufacturer, announced plans to open three production facilities in Europe by 2025. The company currently exports vehicles from China but believes that producing cars closer to European consumers will reduce costs and improve competitiveness. European car manufacturers have expressed concern about increased competition from Chinese firms, which benefit from lower production costs and government subsidies. Trade unions in Germany and France have warned that jobs in the domestic car industry may be at risk.
(a) Define the term 'multinational company'. [2 marks]
(b) Identify two reasons why BYD wants to produce cars in Europe rather than only exporting from China. [2 marks]
(c) Explain how government subsidies might give Chinese car manufacturers a competitive advantage. [4 marks]
(d) Discuss whether European governments should restrict imports of Chinese cars to protect domestic car manufacturers. [6 marks]
Section B — Extended Response (36 marks)
Question 5
Many governments aim to keep inflation rates low and stable.
(a) Explain how inflation is measured and identify two limitations of using a consumer price index. [8 marks]
(b) Evaluate the view that a low rate of inflation is always beneficial for an economy. [12 marks]
Question 6
The table below shows trade data for Country Z over a two-year period.
| Year 1 (billion dollars) | Year 2 (billion dollars) | |
|---|---|---|
| Exports of goods | 145 | 138 |
| Imports of goods | 178 | 195 |
| Exports of services | 56 | 64 |
| Imports of services | 42 | 48 |
| Investment income (net) | +12 | +8 |
| Transfers (net) | -5 | -6 |
(a) Calculate the current account balance for Country Z in Year 2. Show your working. [4 marks]
(b) To what extent should a government be concerned about a current account deficit? [12 marks]