Essays

Question 1

Policies governments could use to develop certain industries

Answer 1

• import tariffs and protectionist measures
• subsidise factories/manufacturers
• invest in infrastructure e.g. roads & ports to make exporting easier
• investing in renewable electricity to help factories reduce costs
• deregulation and reduce corporation tax
• interventionist supply side policies (education and training)

Question 2

Evaluation of policies used to develop certain industries

Answer 2

• opportunity costs of spending
• country should focus on industries for which they have a comparative advantage in
• time lag for policies to have an impact
• risk of corruption
• risk of educated workforce emigrating to MEDCs

Question 3

Points for the role of the financial sector in the growth and development of developing countries

Answer 3

• facilitating saving so banks have more funds for lending, facilitating investment and therefore growth
• promoting lending to enable more investment in the economy (fractional reserve banking)
• exchanging currencies - enabling firms to import parts and materials (often more cheaply) and also enables them to export helping to increase the size of their market
• providing a market for equities
• harrod-domar model
• microfinance

Question 4

Evaluation of points for the role of the financial sector in the growth and development in developing countries

Answer 4

• clear rule of law required for financial sector to develop
• risk of corruption
• risk of market failure in financial market
• lack of financial literacy in developing countries may limit potential

Question 5

Benefits of a country joining the WTO

Answer 5

• current account surplus (macro-objective) due to increased trade
• employment may rise
• increased FDI leads to higher living standards

Question 6

Evaluate the benefits of joining the WTO

Answer 6

• time lags
• rise in exports not guaranteed as other countries may produce a better quality product and during an economic boom, consumers may choose those products
• FDI may lead to the repatriation of profits to shareholders

Question 7

Impacts of tariffs on domestic consumers and producers

Answer 7

• retaliation from foreign nations -> loss of jobs
• fall in economic growth due to distortion of comparative advantage -> lower real incomes for consumers (due to less job creation)
• fall in producer profits

Question 8

Evaluation of negatives of tariffs on domestic consumers and producers

Answer 8

• significance of PED and PES
• short run/long run
• government revenue gained -> subsidies and investment -> econ growth
• infant industries can grow as less competition
• improve CA position
• potential domestic job creation

Question 9

State some effects of the growth of trading blocs on global trading patterns

Answer 9

• trade creation: domestic production is replaced with more efficient imports from a member of the trading bloc
• increased imports due to the removal of protectionist barriers within member countries
• increased specialisation/EoS as can now sell to a larger market

Question 10

Evaluation of the growth of trading blocs on global trading patterns

Answer 10

• trade diversion: due to protectionist measures imposed on non-member countries, countries may purchase imports from less efficient countries within a trading bloc instead of more efficient ones outside of the bloc
• products may still be cheaper from outside the trading due to EoS
• possible conflict with WTO rules
• only within a certain region so effect may be limited

Question 11

Chain of analysis for ‘spending on education increases real GDP’

Answer 11

• spending on education means workers gain higher level of human capital
• therefore workers become more productive and efficient so costs of production fall
• resultantly, SRAS shifts out and prices fall from P1 to P2
• international competitiveness increases and so exports increase due to the lower price
• therefore, AD shifts out (export led growth) meaning economic growth has occured