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Economics · May / June 2025 · Paper 22 · Question 4

0455

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The question as text

In 2022, more than a quarter of a million workers, including doctors, left Sri Lanka to work in other countries. This was largely due to economic problems, including an inflation rate of 50% and a concern that unemployment might rise. The Sri Lankan Government increased direct taxation. It also encouraged some public sector workers to work abroad temporarily. People who work abroad often send money home to relatives.

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  • 4(a)[2]

    Identify two types of unemployment. Two from:

    Frictional (1)

    structural (1)

    cyclical / demand deficient (1)

    2 If more than two types given, consider the first three. Also accept voluntary unemployment, involuntary unemployment, seasonal, classical, casual, regional, technological. Accept demand-deficient as an alternative to cyclical.

  • 4(b)[4]

    Explain two ways that money received from relatives working abroad could raise their families’ living standards. Logical explanation which might include: Could spend more on food / buy more products / buy more basic necessities have higher purchasing power / more income / could increase overall spending (1)

    reduce poverty (1). Could spend more on better quality food (1)

    improve nutrition / improve health (1). Could spend money on education / training (1)

    increase earning potential / wages (1). Could spend on healthcare (1)

    raise life expectancy (1). Could spend on housing (1)

    reduce illness (1). May be able to afford luxuries (1)

    e.g. may be able to afford a holiday / car (1). Could set up a small business (1)

    which could earn them an income (1)

    Could pay off debts / reduce need to borrow / reduce cost of borrowing (1)

    reduce stress (1). Could save more (1)

    earn interest / pay for e.g. healthcare/education of children in the future (1)

    Could work fewer hours / fewer jobs (1)

    less stress (1). 4 One mark each for each of two ways identified and one mark each for each of two explanations. If more than two ways given, consider the first three. No marks for why the money received may be large due to e.g. lower tax rates abroad, high exchange rate. Mark

  • 4(c)[6]

    Analyse how an increase in direct taxation could increase unemployment. Coherent analysis which might include:

    (Increase in) (personal) income tax (1)

    (increase in) tax on wealth (1)

    would reduce disposable income / purchasing power / money available / the amount of their wages they can keep (1)

    reduce consumer spending (1)

    lower total demand (1)

    lower demand for workers (1)

    as demand for workers depends on demand for goods and services / derived demand (1)

    increase cyclical unemployment (1).

    Reduce incentive to work / encourage workers to leave their jobs (1)

    may now rely on unemployment benefit / as may receive more from unemployment benefit than from a now lower paid job (1)

    increase frictional/voluntary unemployment (1).

    (Increase in) corporation (corporate income) tax (1)

    will reduce the amount of profit that can be kept / reduce profit (1)

    firms may reduce output / reduce economic growth / may cause a recession / reduce supply / less incentive to expand (1)

    reduce investment (1)

    result in cyclical unemployment (1)

    may reduce employment to cut costs (to maintain profit) (1). Mark

  • 4(d)[8]

    Discuss whether or not a doctor would benefit from working in another country. In assessing each answer, use the table opposite. Why they might:

    may be higher paid, higher living standards
    may benefit from lower inflation
    may benefit from lower taxes
    may be more chances of gaining a job or gaining a promoted post
    may have better working conditions
    may have more fringe benefits
    may gain new skills and experience
    may be safer environment
    may be able to send money home to family
    may provide better opportunities for their children. Why they might not:
    may have longer working hours
    may have less holidays
    may have less job security
    may miss friends / relatives
    may face discrimination
    may face language problems/ cultural differences. 8 Maximum of 4 marks if discussing working in another city rather than country. 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 Mark Guidance Level Description 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. Mark
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