Economics · Oct / Nov 2016 · Paper 23 · Question 7

Define ‘a depreciation in the value of an exchange rate’. [2]

A fall in the value (1)

of a floating exchange rate (1)

compared to other currencies e.g. US$ (1).

Explain two causes of a high economic growth rate. [4]

An increase in the quantity of resources (1)

e.g. the size of the labour force may grow (1). An increase in the quality of resources e.g. labour or technology (1)

raises productivity of resources (1). Expansionary fiscal policy / lower tax rates (1)

increasing total demand which may encourage firms to increase employment (1). Supply-side policy (1)

e.g. privatisation to increase efficiency (1). More MNCs setting up in the country (1)

adding to the country’s output (1). Use of unused resources e.g. newly found oil or gas reserves (1)

increase s output (1). Lower interest rates / greater money supply (1)

increases total (aggregate) demand (1). Increase in exports / increase in balance of payments surplus (1)

leads to increase in total (aggregate) demand (1).

Analyse how the pattern of employment within an economy tends to change as the country develops. [6]

The number/proportion employed in the primary sector tends to decline (1)

productivity rises meaning fewer workers are needed (1). The number/proportion employed in the secondary sector tends to rise at first (1)

and then falls (1). The number/proportion employed in the tertiary sector increases (1)

most workers in developed countries are employed in tertiary sector (1). The number/proportion of skilled workers increases (1)

as education levels develop (1). The number/proportion of women employed increases (1)

as social attitudes change (1). The number/proportion of migrant workers may change (1)

as income levels rise (1).

Discuss whether an increase in tariffs on imports would reduce unemployment. [8]

Up to 5 marks for why they might;

Tariffs impose extra costs on importers (1)

prices may rise (1)

causing a fall in demand for imports (1)

with some consumers switching to domestically produced products (1)

domestic firms may expand output (1)

taking on more workers (1). Up to 5 marks for why it might not: Consumers may still buy imports (1)

if their price is still lower (1)

or quality is still higher (1). Domestic firms may expand output (1)

by employing more capital goods (1)

getting existing workers to work overtime (1). Tariffs on imports may lead to other countries imposing tariffs on the country’s exports (1)

jobs may be lost in the exporting industries (1). Tariffs increase costs of production (1)

imported raw materials may rise in price (1)

this may cause cost-push/imported inflation (1)

firms cut costs by reducing workers (1)

thereby increasing unemployment (1).