Economics · Oct / Nov 2016 · Paper 23 · Question 5
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The question as text
The 48 countries with the lowest Human Development Index (HDI) values have 28 million citizens working abroad. These workers save some of their earnings to send home to their relatives. Research shows that most transferred money is spent on food and housing by their families, raising their standard of living. These remittances in 2013 were double the value of foreign direct investment received by these countries.
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Show the answer and mark scheme
5(a)[2]
How does the amount and proportion of income spent on food change as people get richer? [2]
The amount spent is likely to increase (1)
while the proportion spent is likely to fall (1).
5(b)[4]
Explain the difference between saving and borrowing. [4]
Saving is income minus spending / putting money in the bank (1). Borrowing is money obtained from a lender (1). Saving involves spending less than income (1)
whereas borrowing means spending more than income (1). Savings increase wealth (1)
borrowing increases debt (1). Savings earn interest (1)
borrowing incurs charges / interest (1). Savings allows spending later (1)
borrowing allows spending now (1).
5(c)[6]
Analyse the three ways a country’s HDI value could increase. [6]
Better health care (1)
increase life expectancy (1). Increased spending on education (1)
would increase mean and expected years of schooling (accept literacy) (1). Increased employment/economic growth (1)
would increase GNI/GDP per head/average income (1). N.B. max 2 marks for each component of HDI
5(d)[8]
Discuss whether a government should encourage some of the country’s people to work abroad. [8]
Up to 5 marks for why it should: Income can be sent back home .1) to support dependents (1)
increase incomes (1)
raising their standard of living (1). May reduce unemployment (1)
if people’s skills at not in demand at home (1)
may reduce government expenditure on benefits (1). Workers can learn skills abroad (1)
which they can bring back to increase labour productivity (1). Up to 5 marks for why it should not: Highly skilled workers may go abroad (1)
vacancies may be left unfilled (1)
labour productivity may fall (1)
wages may rise (1)
causing cost push inflation (1). The reduction in the quantity and quality of the labour force (1)
may discourage MNCs setting up in the country (1)
creates greater dependency on those remaining (1). Fall in working population (1)
may reduce aggregate demand (1)
may reduce government revenue (1)
less money for education/ health care / reducing income inequality etc. (1).
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