Economics Paper 2 - 9/12 mark questions Flashcards
With reference to the data above and your knowledge of economics, assess the benefits for a country, such as Thailand, of being a trade bloc member. (9)
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* Trade blocs are usually groups of countries in specific regions that manage and promote trade activities
- This can result in more free trade between member countries
- This can benefit member countries such as Thailand because they have access to a wider market in ASEAN countries, such as Vietnam, in which to sell their goods and services
- Firms in countries such as Thailand may be able to exploit economies of scale or specialisation can occur
- Consumers may benefit with lower prices and/or greater choice of goods and services
- Being a member of the ASEAN trade block may attractincreased FDI
- Membership of the trade bloc has contributed to an increase in GDP per capita from $122 to $4 021
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* Thailand may face increased competition as imports from other member countries increase
- This may have a damaging effect on Thailand’s domestic firms
- Countries such as Thailand may rely too heavily on trade within the bloc rather than trading with non-member countries such as India
- The overall benefits will depend on the ability of a country to compete within the region and the level of trade with non-member countries
Inflation remains a major problem for Turkey’s economy. Annual inflation in Turkey increased to 11.9% in October 2017. The highest price rises were for transportation, which rose by 16.79% and food, which increased by 12.74%.
(e) With reference to the data above and your knowledge of economics, assess the impact of inflation on a country such as Turkey. (9)
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* Inflation is the rate at which the general level of prices for goods and services is rising within an economy
- This may make goods and services too expensive for many people and they cannot afford as much as they used to
- The data shows the price of transportation and food has increased by 16.79% and 12.74%, which reduces the purchasing power of consumers if wages do not keep up with inflation
- Shoe leather costs may increase as consumers must shop around to find the best deals on food and other products due to the high rates of inflation
- Investment is likely to fall as firms lose confidence
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* Inflation may not be a problem if wage increases keep up with inflation
- Demand pull inflation may lead to a fall in
unemployment as firms try to cope with rising demand - Although high rates of inflation are bad for an economy, low rates of inflation can also have disadvantages to an economy
- Figure 3 shows the inflation rate fluctuates over the period of time and much will depend on future fluctuations
A report by the charity Oxfam, stated that Vietnam has 210 super-rich people. Their combined earnings for one year are enough to take 3.2 million people out of poverty and end absolute poverty in Vietnam. To reduce inequality and poverty, Oxfam is calling on international leaders to increase taxes to fund healthcare, education and job creation. Oxfam also asked business leaders to pay employees a living wage and pay their fair share of tax.
(c) With reference to the data above and your knowledge of economics, evaluate whether an increase in progressive taxes is the most effective way to reduce inequality and poverty for a country such as Vietnam.
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* There can be a reduction in inequality by taking lower average levels of tax from low wage earners and taking more from higher earners
- Increasing progressive taxes will take more income from those on high-income levels
- If the Vietnamese government taxed the 210 super-rich at a higher rate of taxation, the government would have more revenue
- This could be spent on public services such as education which could help to reduce inequality and poverty
- If low income work has a lower rate of tax, it encourages people to enter the labour force thereby reducing poverty
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* Increasing the levels of progressive taxation can be difficult and unpopular
- Higher rates of progressive taxation may create a disincentive effect on higher earners
- Similarly, higher corporation tax may discourage investment in Vietnam which may have a negative impact on the economy
- However, it also depends at what level income tax is set as to its effectiveness
- There are alternatives to increasing progressive taxation which may be more effective such as redistribution through benefits payments or investment in education and healthcare
- A combination of measures may be best in reducing levels of poverty and inequality in Vietnam
A new UK report identified the urgent need to reduce pollution from vehicles and provide more open spaces and parks.
Researchers looked at the impact on health when participants walked for two hours on London’s busy Oxford Street. This was then compared to those walking in the nearby large open space of Hyde Park.
The results showed that people walking in the park performed better. The air pollution from vehicle fumes largely removed the health benefit from the exercise in Oxford Street. The report suggests that people should avoid walking in busy streets and should instead walk in parks or open spaces.
(Source: adapted from http://edition.cnn.com/2017/12/05/health/ exercise-polluted-urban-streets-intl/index.html)
(g) With reference to the data above and your knowledge of economics, assess whether the government should provide more parks and open spaces.
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* The report indicates that parks decrease health costs,
through encouraging exercise and reducing air pollution
* This reduces government expenditure on health care
and improves the lives and productivity of the
population
* Parks and open spaces not only provide benefits to
people but also protect wildlife and ecosystems within
an urban area
* Parks can be used for recreational purposes and a place
for children to play which can reduce negative
externalities for a government
* Depending on their size, parks can bring in tourism
revenue to local restaurants, hotels, snack shops, and
stores
* Parks can host festivals, concerts and athletics events,
bringing additional boosts to the local economy
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* However, there is an opportunity cost to the
government in providing parks and open spaces
* This area of land could be used for other purposes such
as housing or for commercial development which may
create jobs and increase output
* There is a cost in creating and maintaining the park
which must be funded by the government, as the park is
free to use
* The overall benefits will depend on how many people
use the park and if there are alternative ways to protect
the environment/reduce pollution such as pollution
permits, regulation or fines
In 2017, unemployment in South Africa reached its highest level in 13 years at 27.7%. Concerns have been expressed about the very high levels of youth unemployment and the social problems this might cause. Statistics show that 39% of all unemployed South Africans have never worked before and for young people this figure is even higher, at 60.3%.
(e) With reference to the data above and your knowledge of economics, assess the impact of high rates of unemployment on a country such as South Africa.(9)
AO2 (3 marks)/AO3 (3 marks)/AO4 (3 marks)
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* Unemployment occurs when people of working age who
are both willing and able to work cannot find a job
* High levels of unemployment such as 27.7% will result in
lower GDP as a large part of the workforce will be
unproductive
* There will be a much greater burden on the government
to provide benefits to the unemployed
* At the same time tax revenues will be lower meaning
less is available to spend elsewhere
* The government may have to provide more education
and training schemes, especially for young people as
60.3% of young people have never had a job
* There may be an increase in poverty within the country
as unemployed workers have no income apart from
benefits from the South African government
AO4
* However, high rates of unemployment may help some
firms compete
* Some firms within South Africa may find it easier to
recruit from a larger pool of workers due to the 27.7%
unemployment rate
* Some firms may see a reduction in labour costs if there
are high levels of unemployment due to fewer wage
demands
* The overall impact will depend upon the type of
unemployment, the duration and the state of the
economy in South Africa
Following a trip to Asia in 2017 by US President Donald Trump, China has reduced tariffs from 17.3% to 7.7% on over 200 consumer products. These include pharmaceuticals, food, health supplements and clothing.
Many multinational corporations may have major financial gains. Nestle’s sales could increase by 15% or $18.7bn because of the reduction in tariffs. Procter & Gamble, will also benefit from tariff reductions on items ranging from shampoos to electronic toothbrushes.
(c) With reference to the data above and your knowledge of economics, evaluate the possible benefits of reducing the level of tariffs on imported goods and services to China.(12)
AO2 (4 marks)/AO3 (4 marks)/AO4 (4 marks)
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* There will be a reduction in prices of imports for Chinese consumers now that the average tariff has been reduced
from 17.3% to 7.7%
- There would be an increase in competition for domestic firms which may encourage them to become more efficient
- Chinese consumers will not only have a greater choice but may have access to better quality goods which
cannot currently be met domestically - Chinese consumers would see an increase in living standards overall
- If China reduces its tariffs other countries may do the
same which would make it easier for China to export more goods
AO4
- However, tariffs can be a good way to protect Chinese
infant industries which may now face increased competition from cheaper imports from MNCs such as Nestle or Proctor & Gamble - This may result in an increase in unemployment in Chinese firms who make consumer products
- Tariffs are also a good way to gain revenue for the Chinese government and this will be reduced as tariff rates have fallen from an average of 17.3% to 7.7%
- Reducing tariffs may also reduce the surplus on the current account balance as more consumers buy imported products
- However, the overall impact on the Chinese economymay be limited as it also depends on whether Chinese
consumers do switch to imported goods rather than buy Chinese products - It may not have a great impact as only 200 products are involves
Kenya is the third largest exporter of cut flowers in the world, accounting for 1.3% of its GDP. Kenya’s main airport has a terminal dedicated especially to the transport of flowers and vegetables.
The Kenyan flower industry has created many employment opportunities. Around 100,000 people are employed directly on the flower farms and over 500,000 people benefit indirectly from this industry.
Over half of Kenya’s 127 flower farms are concentrated around Lake Naivasha due
to the large amount of water needed to grow the flowers. Some environmental campaigners have expressed concerns over the impact that the flower industry could have on the lake.
(c) With reference to the data above and your knowledge of economics, evaluate the likely benefits for Kenya of the globalisation of its flower industr
