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Economics · May / June 2021 · Paper 22 · Question 4

0455

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The question as text

Turkey’s birth rate is falling which is likely to reduce its supply of labour. However, improvements in the quality of labour and the increase in foreign multinational companies (MNCs) operating in Turkey (the host country to the MNCs) may help the economy avoid a recession. One reason why economists are worried that a recession may occur is an expected rise in the interest rate.

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  • 4(a)[2]

    Define birth rate. The number of births per thousand of the population (1)

    in a year (1)

    live births (1)

    2 Not sufficient to have just number of births.

  • 4(b)[4]

    Explain two causes of an increase in the quality of labour in a country. Logical explanation which might include: Improvements in education (1)

    qualifications / knowledge (1). Improvements in training (1)

    increasing skills (1). Improvements in healthcare (1)

    making workers physically/mentally stronger (1). Increases in pay (1)

    raising motivation (1). Improvements in nutrition (1)

    enabling workers to work harder / concentrate more (1). Reduction in working hours / length of working day (1)

    keeping workers fresher / enabling them to concentrate more (1). Improvements in working conditions (1)

    raising motivation / enabling workers to work harder / concentrate more (1)

    Immigration (1)

    of skilled workers (1). Experience (1)

    becoming more familiar with tasks (1). Specialisation (1)

    become more familiar with one task / ‘practice makes perfect’ (1). 4 One mark each for each of two causes identified and one mark each for each of two explanations.

  • 4(c)[6]

    Analyse how a rise in the interest rate could cause a recession. Coherent analysis which might include: A higher interest rate would increase the cost of borrowing (1)

    reduce borrowing (1)

    reduce the spending power of people who have borrowed in the past (1)

    increase saving (1)

    consumer expenditure / spending may fall (1)

    investment may fall / may discourage MNCs (1)

    unemployment may increase / employment may fall (1)

    total demand may fall (1)

    the output of goods and services / GDP may fall (1)

    if output falls over a period of two quarters / six months there will be a recession (1). A higher interest rate may encourage more people to buy the currency (1)

    to put money into the country’s financial institutions (1)

    raising the value of the foreign exchange rate (1)

    raising the price of exports (1)

    lowering demand for exports (1)

    reducing the price of imports (1)

    increasing demand for imports (1).

  • 4(d)[8]

    Discuss whether or not MNCs improve the economic performance of the host countries in which they operate. In assessing each answer, use the table opposite. Why they might:

    may bring in new technology and methods of production, increasing economic growth
    may create new jobs, may reduce unemployment
    may add to exports, reducing a current account deficit / increasing a current account surplus
    may create more competition / have greater efficiency, lowering inflation
    may increase tax revenue, enabling the government to spend more on e.g. education and healthcare Why they might not:
    may drive out domestic producers, leaving the country’s output unchanged
    may employ workers from their home country
    may import capital equipment and raw materials from their home countries
    may deplete non-renewable resources, reducing sustainable economic growth
    may provide only low-skilled, low-paid jobs to locals
    send profits back to home country
    may cause external costs e.g. pollution 8 Help avoid a recession = one relevant identification. 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.
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