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Date November 2019 Marks available 2 Reference code 19N.3.HL.TZ0.2
Level Higher level Paper Paper 3 Time zone Time zone 0
Command term Outline Question number 2 Adapted from N/A

Question

The information in Table 1 refers to Country A (base year: 2011).

Table 1

The central bank of Country A aims to achieve price stability, defined as “inflation below but close to 2 % annually”.

The information in Table 2 refers to Country B, an economically less developed economy.

Table 2

Calculate the inflation rate for 2014 and for 2015. Enter your results in Table 1.

[2]
a.i.

Calculate the unemployment rate for 2012 and for 2013. Enter your results in Table 1.

[2]
a.ii.

Explain two reasons why low and stable inflation is desirable.

[4]
b.

State two functions of a country’s central bank.

[2]
c.

Using the data in Table 1 to support your answer, identify two reasons why many economists would consider Country A’s economy to be performing poorly in 2012.

[2]
d.

State one reason why monetary policy is considered to have limited effectiveness in increasing aggregate demand if an economy is in a deep recession.

[1]
e.

Explain two reasons why fiscal policy may prove effective in lifting an economy out of a deep recession.

[4]
f.

Outline the meaning of the natural rate of unemployment, with reference to the long-run Phillips curve and types of unemployment.

[2]
g.

Using the information in Table 2 for Country B calculate nominal GDP in 2014. Enter your result in Table 2.

[1]
h.i.

Using the information in Table 2 for Country B calculate nominal GNI in 2015. Enter your result in Table 2.

[1]
h.ii.

Using the information in Table 2 for Country B, determine real GDP in 2014 and in 2015. Enter your results in Table 2.

[1]
i.

Using the information in Table 2 for Country B, calculate the rate of economic growth between 2014 and 2015.

[1]
j.

The data in Table 2 suggest that Country B may have attracted significant foreign direct investment (FDI).

Outline one possible disadvantage of foreign direct investment (FDI) for economically less developed countries.

[2]
k.

Markscheme

2014: 1.95
2015: 4.89

Award [1] for each correct answer.

No workings are required.

N.B. Responses written either in Table 1 or in the answer boxes provided should be fully rewarded

a.i.

2012: 7.34
2013: 5.33

Award [1] for each correct answer.

No workings are required.

N.B. Responses written either in Table 1 or in the answer boxes provided should be fully rewarded

a.ii.

For a limited explanation of one reason, award a maximum of [1].

For an accurate explanation of one reason or a limited explanation of two reasons,award a maximum of [2].

For providing an accurate explanation of one reason and a limited explanation of a second reason, award a maximum of [3].

For providing two accurate reasons, award a maximum of [4].

b.

c.

NB A response which only states the correct data without specifying that there is high unemployment and deflation may be awarded a maximum of [1].

d.

Answers may include:

Any other valid reason.

Award [1] for one possible reason.

e.

For a limited explanation of one reason, award a maximum of [1].

For an accurate explanation of one reason or a limited explanation of two reasons, award a maximum of [2].

For providing an accurate explanation of one reason and a limited explanation of a second reason, award a maximum of [3].

For providing two accurate reasons, award a maximum of [4].

f.

NB A response that refers to the types of unemployment that are not cyclical may be rewarded.

g.

351.70 is sufficient for [1].

No workings are required.

NB Responses for (h) and (i) written either in Table 2 or in the answer boxes provided should be fully rewarded.

h.i.

292.56 is sufficient for [1].

No workings are required.

NB Responses for (h) and (i) written either in Table 2 or in the answer boxes provided should be fully rewarded.

h.ii.

2014: 351.70
2015: 355.84

Award [1] for both correct figures.

No workings are required.

OFR applies for 2014 figure.

NB Responses for (h) and (i) written either in Table 2 or in the answer boxes provided should be fully rewarded.

i.

 355.84 - 351.7 351.7 × 100 = 1.1771

No workings are required.

1.18 % or 1.18 is sufficient for [1].

OFR applies.

j.

Award [1] for stating one possible disadvantage without any outline.

Award [2] for stating one possible disadvantage with a brief outline.

Disadvantages may include:

Any other valid disadvantage outlined.

k.

Examiners report

[N/A]
a.i.
[N/A]
a.ii.
[N/A]
b.
[N/A]
c.
[N/A]
d.
[N/A]
e.
[N/A]
f.
[N/A]
g.
[N/A]
h.i.
[N/A]
h.ii.
[N/A]
i.
[N/A]
j.
[N/A]
k.

Syllabus sections

Last exams 2021 » Section 4: Development economics » 4.5 The role of foreign direct investment (FDI) » Foreign direct investment and multinational corporations (MNCs) » Advantages and disadvantages of FDI for economically less developed countries
First exams 2022 » Unit 4: The global economy » 4.10 Economic growth and/or economic development strategies » 4.10.1 Strategies to promote economic growth and/or economic development
Last exams 2021 » Section 4: Development economics » 4.5 The role of foreign direct investment (FDI) » Foreign direct investment and multinational corporations (MNCs)
Last exams 2021 » Section 4: Development economics » 4.5 The role of foreign direct investment (FDI)
First exams 2022 » Unit 4: The global economy » 4.10 Economic growth and/or economic development strategies
First exams 2022 » Unit 4: The global economy
Last exams 2021 » Section 4: Development economics
First exams 2022
Last exams 2021

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