Economics · May / June 2020 · Paper 21 · Question 1

Calculate Vietnam’s GDP per head in 2017. $6900 (1).

Identify two rewards to factors of production. Wages (1)

profits (1).

Explain what happened to Vietnam’s foreign exchange rate between 2010 and 2017. Logical explanation which might include: It fell/depreciated (1)

more dong had to be given to buy one dollar (1).

Explain two benefits an economy may gain from having a young 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).

Analyse why Vietnam’s budget deficit may decline in the future. 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).

Analyse the relationship between government spending on education 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).

Discuss whether or not an increase in competition is likely to benefit 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… ...because of reason e.g. incomes may be lower. Tax revenue may increase because incomes may be higher i.e. 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 subsidies may stimulate the economy more than spending on education. Award up to 4 marks for logical reasons why it might, which may include:

making them more affordable to consumers (1)

and possibly in terms of a greater range of products (1)

with pressure being put on producers to produce good products to attract consumers (1)

Award up to 4 marks for logical reasons why it might not, which may include:

and so spend less improving the quality of the product (1)

Discuss whether or not the increase in borrowing is likely to have caused inflation in Vietnam in 2017. Award up to 4 marks for logical reasons why it might, which may include:

and investment (1)

will increase total (aggregate) demand (1)

making it difficult for supply to respond to higher demand (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:

lowering cost- push inflation (1)

and take greater advantage of economies of scale (1)

may raise labour productivity (1), reduce costs of production (1)

and lower cost-push inflation (1)