Define the term investment indicated in bold in the text (paragraph [2]).

Define the term productivity indicated in bold in the text (paragraph [5]).

Using an AD/AS diagram, explain how expansionary monetary policy might lead to economic growth (paragraph [1]).

Explain the difference between economic growth and economic development (paragraph [7]).

Using information from the text/data and your knowledge of economics, discuss the extent to which continued economic growth may lead to economic development in Kenya.

Candidates who incorrectly label diagrams can be awarded a maximum of [3].

For AD/AS, the vertical axis may be price level or average price level. The horizontal axis may be real output, real national output, real national income, real Y, or real GDP. A title is not necessary.

Responses may include:

• growth is increase in real GDP
• development is measure of well-being/standard of living/welfare
• GDP single indicator/measures only income (quantitative)
• development is composite (qualitative) / made up of multiple measures such as literacy rates, access to clean water, life expectancy, years of schooling, level of gender equality. 

Examiners should be aware that candidates may take a different approach which, if appropriate, should be rewarded.

Do not award beyond level 2 if the answer does not contain reference to the information provided.

Command term
“Discuss” requires candidates to offer a considered and balanced review that includes a range of arguments, factors, or hypotheses. Opinions or conclusions should be presented clearly and supported by appropriate evidence.

Responses may include:

• definition of economic growth
• definition of economic development.

Economic growth and economic development:

• good agricultural performance (paragraph [1]) may increase growth through exports, however dependence on primary products is dangerous because of fluctuating commodity prices (paragraph [7])
• expansionary monetary policy (paragraph [1]) leads to growth but might be difficult to maintain if it causes inflation, however, Kenya is within the central bank’s inflation targets at the moment (paragraph [3])
• infrastructure developments (paragraph [1]), enhanced construction (paragraph [2]) and investment in energy and transportation (paragraph [2]) will all lead to long-term growth, however, there are cost considerations for any developing country
• low inflation (paragraph [2]) enables expansionary policies to continue to be implemented (paragraph [1])
• moderate improvement in the business environment (paragraph [4]) but need to reduce the cost of doing business (paragraph [6])
• low oil prices (paragraph [1]) reduce costs in the economy, thus leading to increased SRAS and growth, however, these may not be sustained and are out of Kenya’s control (external shocks) (paragraph [7])
• currency stability (paragraph [2]) is a factor, but often beyond the control of developing countries (external shocks) (paragraph [7])
• fast-growing neighbouring countries (paragraph [4]) is beyond the control of Kenya (external shocks) (paragraph [7])
• surge in remittances (paragraph [2]) allows increased consumption on necessities and merit goods which support development, but this will be dependent upon continued world economy growth (external shocks) (paragraph [7])
• “a growing middle-class and rising incomes” (paragraph [2]) are signs that economic development is occurring
• PPF to show how economic growth can lead to development (development goods such as merit goods on one axis with PPF increasing)
• Kenya faces development challenges in spite of strong economic growth (inequality, climate change, poverty) that may compromise economic development (paragraph [7]).

Any reasonable discussion.

To reach level 3, students must show awareness of the ways and to what extent (evaluating) economic growth may or may not lead to economic development – making a very clear link between the two (not just an analysis on economic growth or/and economic development). They must present a balanced evaluative approach on how growth might or might not impact on economic development.

This was surprisingly badly answered, often phrased in uneconomic terms eg ''spending money in order to get a profit''.

Again, surprisingly, weak definitions of this important economic term. The best that many candidates could come up with is that involves an increase in efficiency.

This question was well answered overall. Diagrams were generally accurate although a minority of students lost a mark by omitting 'real' when labelling GDP on the horizontal axis. Another limitation on some answers was a failure to explain why AD increased eg explaining the effect of falling interest rates on consumption and/or investment and therefore AD. A small minority failed link the above analysis to economic growth.

Many students lost 1 mark when defining economic growth re: Real GDP by not including 'real'. Also, many students relied on definitions of the terms without making a distinction between the concepts.

Many candidates did not answer this question directly. Some answers were largely generic in nature with minimal reference to the text. Much emphasis was placed on what may cause economic growth and many directed the question to the role of government in generating growth. This was not the question. The extent to which growth will or will not generate development was barely addressed in some cases. The result was that many of the answers were unbalanced at best or irrelevant at worst.