Economics · May / June 2021 · Paper 22 · Question 5

0455

As printed in the paper

The question as text

The money supply in Bangladesh increased every year from 2010 to 2018. Changes in the money supply and the foreign exchange rate can affect a government’s macroeconomic policy aims, including full employment. There have been few mergers between commercial banks in Bangladesh, although its banks are larger than many of its other firms.

Read automatically from the paper; the printed page above is exact.

Show the answer and mark scheme

5(a)[2]
Identify two functions of money. Two from:
Medium of exchange, store of value, standard of deferred payments, unit of account / measure of value. 2 Note: a description of the function gets the mark e.g. money can be used to buy and sell products, may be used to trade. Nothing for characteristics of money,
5(b)[4]
Explain two reasons why commercial banks may want to merge. Logical explanation which might include: Greater market power/share (1)
eliminating a competitor / providing a greater range of services (1). More opportunity to take advantage of economies of scale (1)
lower costs of production / higher profit / example e.g. share ATMs (1). May enable the merged bank to operate in more than one country / become a multinational company (1)
access to new market (1). Become better known (1)
large banks may be more likely to have a brand image (1). May enable rationalisation (1)
eliminate duplication / rase efficiency (1). Survival (1)
may have been loss making / at risk of going out of business (1). 4 One mark each for each of two reasons identified and one mark each for each of two explanations. Nothing for increase revenue.
5(c)[6]
Analyse how a fall in a country’s foreign exchange rate could increase employment. Coherent analysis which might include: A fall in a country’s foreign exchange rate will lower the price of exports (1)
raise the price of imports (1)
make domestically produced products more price competitive (1)
reduce demand for imports (1)
increase demand for exports (1)
increase total demand (1)
raise firms’ revenue and/or profits (1)
encourage firms to increase output (1)
take on more workers (1).
5(d)[8]
Discuss whether or not it is an advantage to keep a firm small. In assessing each answer, use the table opposite. Why it might:
flexible, less people to consult, more in touch with consumers
may be able to provide more personal attention
may receive government subsidies
may be able to concentrate on a niche market
may have good labour relations
may avoid diseconomies of scale Why it might not:
may not be able to take advantage of economies of scale
may be driven out of business by larger competitors
may be difficult to raise finance
risk of being taken over by a larger firm
may have difficulty recruiting highly skilled workers
may not have the resources to survive a fall in demand 8 Accept an answer based on the advantages that large firms have over small firms. 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.

Practise this paper →

Make a free account to save your answers and see your weak topics and ask the AI why a wrong answer is wrong.