Economics · May / June 2024 · Paper 21 · Question 5
0455
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The question as text
In 2020, the price of gold fell in Vietnam. That year, Vietnam was one of Asia’s best performing economies. Unlike some Asian economies, Vietnam did not experience a recession. Its total output, exports and imports all increased. Unemployment did increase from 2.0% to 2.3% but remained very low. One of the aims of fiscal policy can be to achieve full employment.
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5(a)[2]
Identify how the effect of a fall in the price of gold would be shown on a demand curve for gold. A movement down the demand curve (1)
from left to right / extension (1). A movement along the demand curve (1). 2 Accept, as an alternative, a diagram showing a movement down the demand curve. Allow one mark for the idea that demand will rise.
5(b)[4]
Explain two disadvantages of a recession. Logical explanation which might include: Lower output / lower GDP (1)
lower living standards / higher poverty / less income / less consumer spending (1). Higher unemployment / lower employment (1)
higher cost of unemployment benefit (1). Lower investment (1)
due to reduction in confidence (1). Firms shutdown (1)
due to lower profits (1). Lower tax revenue (1)
may cause budget deficit / reduce ability to spend e.g. on education / increase in national debt (1). 4 One mark each for each of two disadvantages identified and one mark for each of two explanations. Mark
5(c)[6]
Analyse why a country may demand more imports. Coherent analysis which might include: Price of imports may fall (1)
due to a fall in costs of production (1)
a rise in the exchange rate (1). Quality of imports may rise (1)
foreign workers may be less skilled (1)
investment in foreign countries may have decreased (1). Incomes may have increased (1)
raising the purchasing power of buyers (1)
increasing the country’s’ need for consumer goods (1)
which the country cannot produce (1)
due to specialisation (1). Trade restrictions may be removed or reduced (1)
e.g. lower tariffs / quotas / subsidies / embargoes will make it easier to import (1). Country needs more raw materials / lacks the technology to produce certain goods (1)
to enable growth of domestic industries (1). Failure of harvest /natural disaster e.g. rice (1)
means need to import the good instead (1). 6 Do not expect, but reward reference to absolute or comparative advantage. A maximum of three marks for only identifying the reasons. Mark
5(d)[8]
Discuss whether or not fiscal policy can achieve full employment. In assessing each answer, use the table opposite. Why it might:
higher government spending and/or lower taxation may increase total (aggregate) demand which could reduce cyclical unemploymentgovernment spending on education and training could raise workers’ skills could increase their mobility and may reduce frictional unemploymentgovernment spending on the provision of labour market information may reduce frictional unemploymentgovernment spending on subsidies may lead to firms increasing job opportunities. Why it might not:government spending may not be raised enough / a cut in taxation may not be sufficientconsumer spending and investment may fall if there is a lack of confidencenet exports may fall if there is a global recessionthere may still be some labour immobility due to e.g. differences in house prices in different parts of the country so structural unemploymentincreased government spending on benefits may be an encouragement not to work and stay unemployed. 8 See Guidance table at the end of the mark scheme. Do not reward a simple reversal of policies in why it might achieve full employment in the why it might not part of the response. Guidance table for Question 2 (d), 3 (d), 4 (d), 5 (d) 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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