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Economics · Oct / Nov 2022 · Paper 22 · Question 3

0455

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The question as text

In 2019, Russia had an unemployment rate of 4.6%. Russia experienced full employment in the past. Its government wants unemployment to be lower. In 2018, the Russian government cut its spending which may have increased poverty. In both 2018 and 2019, the government did not change its income tax rate. Russia operates a proportional tax rate system.

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  • 3(a)[2]

    Define full employment. The lowest unemployment possible (very low percentage) / job vacancies matching the number unemployed (2). Low unemployment (1). May still be some workers in between jobs / some frictional unemployment (1). Zero unemployment (1). 2 One mark for idea of full employment of resources e.g. all workers in employment.

  • 3(b)[4]

    Explain the difference between a proportional income tax system and a progressive income tax system. Logical explanation which might include: Proportional income tax system takes the same percentage / proportion of income (1)

    from all income groups (1). In a proportional income tax rate system, the tax rate does not change (1)

    as income changes (1)

    has no effect on the distribution of income (1). Progressive income tax system takes a larger percentage / smaller percentage (1)

    of the income of the rich / the poor / places a larger burden on the rich (1)

    helps redistribute income from the rich to the poor / reduces the gap between rich and poor / may be used to promote equity (1). In a progressive income tax rate system, the tax rate increases (1)

    as income increases (1). 4 Three marks maximum for proportional income tax system and three marks maximum for progressive income tax system.

  • 3(c)[6]

    Analyse why a cut in government spending might increase poverty. Coherent analysis which might include: A cut in government spending might reduce total demand (1)

    increasing unemployment (1)

    reducing incomes (1). Government spending on subsidies to firms might be reduced (1)

    which may raise prices (1). Government spending on education might be reduced (1)

    this might cause a decrease in skills (1)

    reducing wages (1)

    may lead to vicious cycle of poverty (1). Government spending on healthcare might be reduced (1)

    lowering productivity and wages (1). Government spending on state / unemployment benefits might be reduced (1)

    reducing goods and services that can be bought (1). Government spending on state pensions might be reduced (1)

    the old may not be able to buy basic necessities (1).

  • 3(d)[8]

    Discuss whether or not a fall in a country’s unemployment rate always benefits workers. In assessing each answer, use the table opposite. Why it might be:

    increase choice of jobs
    increase wages
    raise living standards
    increase job security
    competition for workers may raise working conditions
    more may be spent on training. Why it might not be:
    may be result of workers leaving the labour force e.g. emigrating
    may not benefit all workers as some may still be unemployed
    may not be high quality jobs
    may be low-paid jobs
    may be temporary jobs
    may cause inflation reducing real wages. 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 sided 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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