Economics · May / June 2020 · Paper 22 · Question 4

0455

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In 2017, the Japanese government announced improvements to its tax system. The amount of tax raised is influenced by the size and age distribution of a country’s population. Japan’s birth and death rates are falling, its population is ageing, and it has low immigration. Overall, Japan’s population is decreasing.

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4(a)[2]
State two qualities of a good tax. One mark each for two from:
convenient, equitable, certain, efficient, flexible.
4(b)[4]
Explain two causes of a decrease in the death rate. Logical explanation which might include: Rises in income (1)
leading to better living standards (1). Better education (1)
resulting in e.g. better nutrition (1). Better healthcare (1)
due to e.g. advances in medical technology (1). Reduction in crime/end of a war (1)
fewer people dying violently (1).
4(c)[6]
Analyse, using a production possibility curve (PPC) diagram, the effect of a decrease in population size on an economy. Up to 4 marks for the diagram: Axes correctly drawn (1). Initial curve drawn as a curve / line sloping downward to the axes (1). New curve drawn as a curve / line sloping downward to the axes (1). Shift to the left indicated by arrow or letter (1). Up to 2 marks for coherent analysis which might include: A decrease in population size may decrease the size of the labour force (1)
decrease productive capacity (1). capital goods O consumer goods
4(d)[8]
Discuss whether or not an ageing population is a benefit to an economy. In assessing each answer, use the table below. Level Description 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 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 There is a simple attempt at using economic definitions and terminology. Some reference may be made to economic theory, with occasional understanding. 1–2 A mark of zero should be awarded for no creditable content. Why it might:
older people may be an economic asset through their knowledge and experience
the retirement age may be raised so that the labour force may increase
in some countries, an increase in the average age of the population may mean more people are in the labour force and may reduce the dependency ratio
may indicate a good standard of living increasing life expectancy. Why it might not:
may be an increase in the dependency ratio with a smaller proportion of workers to support a higher proportion of retired
any increased spending on healthcare and pensions will involve an opportunity cost
taxes may have to be increased to finance increased costs of healthcare and pensions
any shortage of workers may drive up wages and cause cost-push inflation
older workers may not be up to date with new technology and new ideas

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