Note AcademyNote Academy
Start

Economics · Oct / Nov 2025 · Paper 22 · Question 5

0455

As printed in the paper

The question as text

Some countries engage in dumping by selling their products at less than cost price in Cambodia. The Cambodian Government wants the country to become a high-income economy by 2050. It uses fiscal, monetary and supply-side policies to increase its economic growth rate. Cambodia subsidises some infant industries. The country has one of the world’s largest deficits on the current account of its balance of payments (as a percentage of GDP). Some economists suggest cutting taxes would reduce this deficit.

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

Show the answer and mark scheme

  • 5(a)[2]

    Identify two motives for a firm dumping some of its products in a foreign market.

    Drive domestic firms out of the market / increase market share / gain monopoly power in (overseas) market (1).
    Clear away surplus stock (1)

    keep price high on the domestic market (1)

    increase exports / sales / revenue (1). 2 If more than two motives are given, consider the first three.

  • 5(b)[4]

    Explain two differences between monetary policy and supply-side policy. Logical explanation which might include the following.

    Monetary policy is usually implemented by the central bank (1)

    supply-side policy by the government (1).

    Monetary policy may be used to increase or reduce economic activity (1)

    supply-side policy is only used to increase economic activity (1).

    They have different policy measures (1)

    e.g. monetary policy has the rate of interest whereas supply side policy has privatisation (1).

    Monetary policy aims to influence total demand (1)

    supply-side policy aims to increase total supply (1).

    Supply side policies tend to take longer to implement and have an impact (1)

    than monetary policy which tends to have a more short -term impact (1). 4 If more than two differences are given, consider the first three.

  • 5(c)[6]

    Analyse how a government subsidy could help to protect an infant industry against foreign competition. Coherent analysis which might include: An infant industry’s costs may initially be high (1)

    government subsidy is an extra payment to an industry (1)

    some of the subsidy could be used to buy more capital goods / technological innovation (1)

    employ skilled workers (1)

    enable an infant industry to grow in size / increase output (1)

    obtain economies of scale (1)

    lower (average) cost / improve productivity (1)

    lower their prices (1)

    making their products more (internationally) competitive (1)

    increase demand for their goods (1)

    increase exports (1)

    raise quality (1)

    increase quality competitiveness (1).

  • 5(d)[8]

    Discuss whether or not cuts in taxes will reduce a deficit on the current account of a country’s balance of payments. In assessing each answer, use the table opposite. Why it might:

    cut in corporation (corporate income) tax may increase willingness and ability to invest
    higher investment may raise quality and reduce costs
    increase exports and lower imports
    cut in personal income tax may increase workers’ motivation, raise productivity and cut costs
    lower corporation (corporate income) tax could be imposed on infant industries
    attract MNCs which can increase exports and reduce imports
    cuts in indirect taxes may lead to lower prices which may increase the demand for domestic goods and reduce the demand for imported substitutes
    cuts in tariffs may make it easier for firms to import cheaper raw materials from abroad which may enable them to reduce prices increasing export competitiveness. Why it might not:
    cut in personal income tax may increase spending which may increase total demand leading to inflation reducing international competitiveness
    more imports may be purchased
    exports may be diverted to the home market
    reduce tax revenue and lower government spending
    lower government spending on education, healthcare, transport could reduce productivity
    lower taxes on imports (tariffs) may increase imports. 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 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.
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.