| Date | November 2018 | Marks available | 1 | Reference code | 18N.3.HL.TZ0.3 |
| Level | Higher level | Paper | Paper 3 | Time zone | Time zone 0 |
| Command term | Calculate | Question number | 3 | Adapted from | N/A |
Question
The information provided in Table 1 represents data for Country X in 2015.
Table 1
The information provided in Table 2 relates to Country Y.
Table 2
Figure 4 represents the circular flow of income in Country A, with values in billions of dollars ($).
Figure 4
The government of Country A decides to increase the level of taxation to $34 billion.
Table 3 provides information on the rates of direct tax in Country A.
Table 3
Table 4 provides information on the household distribution of income in Country A.
Table 4
Calculate gross domestic product (GDP) for Country X in 2015.
Calculate gross national income (GNI) for Country X in 2015.
Calculate the rate of consumer price inflation in 2016.
Using the GDP deflator, calculate the percentage change in real GDP between 2014 and 2015.
Identify the term represented in Figure 4 by the letter V.
Identify the term represented in Figure 4 by the letter M.
State the four factor payments which constitute the income flow in the circular flow of income model.
Define the term leakages.
Determine the size of the budget surplus/deficit and state which using Figure 4.
Using an AD/AS diagram, explain how this may affect the level of unemployment.
Calculate the average tax rate for an individual who earns $64 000 per year.
Draw and label the Lorenz curve diagram for Country A on Figure 5.
Explain how an increase in the top rate of direct tax from 32 % to 36 % might affect equity and efficiency in Country A.
Markscheme
GDP = C + I + G + (X − M)
= 745 + 229 + 437 + 234 − 289
Any valid working is sufficient for [1].
= $1356 billion
An answer of 1356 billion or $1356 (without working) is sufficient for [1].
GDP + net factor income = GNI
1356 − 111 = $1245 billion
An answer of 1245 (without working) is sufficient for [1].
OFR applies.
An answer of 3.66 (without working) is sufficient for [1].
real GDP in 2015
rate of change
Any valid working is sufficient for [1].
= 2.57 %
An answer of 2.57 (without working) is sufficient for [1].
Income OR factor income OR household income OR factor payments.
Award [1] for identifying the term correctly.
imports
Award [1] for identifying the term correctly.
rent, wages, interest and profit
Award [1] for three payments provided.
Award [2] for four payments provided.
budget surplus of $5 billion
Award [1] for determining the size of the budget correctly.
NB A response in which the AS curve shifts to the left, on the basis that the increase in taxation may be indirect taxation, should be rewarded.
12 000 × 5 % + 15 500 × 12 % + 32 500 × 21.5 % + 4 000 × 32 %
= $10 727.50
Working is not required.
average tax rate
Any valid working is sufficient for [1].
= 16.76 %
An answer of 16.76 or 0.17 (without working) is sufficient for [1].
Award [1] for an accurate Lorenz curve.
OR
Award [1] for a Lorenz curve which is inaccurate but which goes from (0,0) to (100,100) and which lies below the line of perfect equality AND axes labelled accurately.
Award [2] for an accurate Lorenz curve with axes correctly labelled.
NB The term “cumulative” is not necessary for labelling of axes.
NB A response which explains that inequality will be reduced, without explicitly using the term equality/inequality, should be rewarded.
