Economics (AS & A Level) · Feb / March 2024 · Paper 22 · Question 1

Artificial Intelligence Artificial Intelligence (AI) is a form of technological progress. It involves computers or computer- controlled robots engaging in tasks usually performed by humans. Many businesses invest in AI to reduce their costs, to increase their efficiency by reducing human errors and to raise business revenues and profits. The COVID-19 pandemic has accelerated this process – from increased use of contactless card payment systems to large-scale investment in driverless taxis. In China, a leading internet search company plans to follow some of its rivals in the United States (US) by starting a driverless taxi service in 100 cities by 2030. Nevertheless, the pace of growth in AI has raised concerns that this will result in increased unemployment. One study suggests that up to 38% of US jobs are at risk from automation by the mid-2030s. To date, Japan has between 200 and 300 AI companies. It is also the leading supplier of industrial robots and third, behind China and the US, in spending on research and development into AI. Just a few years ago, the growth of the internet created similar fears. Despite these concerns, the technology created millions of jobs and contributed as much as 10.5% towards US GDP in 2020. As a result, some economists suggest that the movement towards AI will fundamentally change the world and the way we work and live but will not lead to large rises in unemployment. AI technology may create more jobs than it destroys. Nonetheless, the danger remains that automation will lead to a society of winners and losers. These newly created jobs will require new skills and significant investment in training young people and retraining adults. Therefore, governments may need to implement targeted policies to ensure that any changes to structural unemployment are only short-lived. However, rising national debt alongside projections of low economic growth, as shown in Table 1.1, may reduce the ability of governments to deliver such policies. 3 Table 1.1: Selected macroeconomic indicators for Japan and the US, 2020 to 2025 Japan US Central government debt (% of GDP) Unemployment rate (%) Real GDP growth (% change from previous year) Central government debt (% of GDP) Unemployment rate (%) Real GDP growth (% change from previou year) 020 254.1 2.8 – 4.6 133.9 8.1 – 3.4 021 256.9 2.8 2.4 133.3 5.4 6.0 022* 252.3 2.4 3.2 130.7 3.5 5.2 023* 250.8 2.3 1.4 131.1 3.0 2.2 024* 251.0 2.3 0.8 131.7 3.0 1.7 025* 251.3 2.3 0.6 132.5 3.1 1.7 *forecast Source: IMF, 2021

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