Economics · Oct / Nov 2023 · Paper 22 · Question 2
0455
As printed in the paper
The question as text
Botswana uses both capital goods and labour in its diamond mining industry. The country had an average economic growth rate of 3.8% between 2015 and 2019 compared to a global average of 2.8%. Over this period, the country experienced a low inflation rate and a move away from protectionism and towards free international trade.
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2(a)[2]
Define, with an example, a capital good. A good used to produce another good or service / a human- made good used for production (1)
e.g. a machine (1). 2 If more than two examples are given, consider the first two.
2(b)[4]
Explain two reasons why a low inflation rate may increase a country’s economic growth rate. Logical explanation which might include:
make the country’s products internationally competitive (1)sell more exports / buy fewer imports (1)
create greater certainty (1)encourage investment / attract MNCs (1)
keep increase in costs low (1)may reduce claims for higher wages/ higher profits (1)
increase confidence (1)may increase demand / increase profits 1). 4 One mark each for each of two reasons identified and one mark each for each of two explanations.
2(c)[6]
Analyse how a government could reduce protectionism and move towards free international trade. Coherent analysis which might include:
remove tariffs (1)reduce price of imports (1)
if firms have lower costs of production, they will be able to compete (1)
remove quotas / increase quota (limit) (1)remove bans / embargoes (1)
increase quantity of imports / reduce limits on imports (1)
remove subsidies (1)firms’ products will not be artificially cheap (1)
other countries may remove their protectionism (1)enabling exports to be sold without restrictions (1). 6 Allow deregulation as an alternative to remove quotas or embargoes. Reward removing / reducing bureaucracy, voluntary export restraints. Reward but do not expect reference to exchange control.
2(d)[8]
Discuss whether or not a country will benefit from diamond mining. In assessing each answer, use the table opposite. Why it might:
high global demandcan improve the current account of the balance of paymentscreate employment, both skilled and unskilled jobsincrease output / economic growthmay increase tax revenue. Why it might not:demand will fall in a recessionprice may fluctuatemay be competitioncan be accidentscan create external costs e.g. pollutionif mined by an MNC, profit may be sent to the home countrysupply may be depletedprice may increase in the future so better to conserve diamonds nowmay not be a large proportion of GDP. 8 Reward but do not expect reference to social welfare will be increased if social benefit exceeds social cost. Leve l Description Mark s 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 Guidance 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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