Define the term gross domestic product (GDP) indicated in bold in the text (Text D, paragraph [1]).

List two dimensions of the Inequality adjusted Human Development Index (IHDI) (Text D, paragraph [3]).

Using the information in Table 3, calculate the change in Sierra Leone’s current account balance from 2017 to 2018.

Using the information in Table 3, calculate Sierra Leone’s rate of economic growth between 2017 and 2018.

Using an exchange rate diagram, explain how the fall in export revenue contributed to the depreciation of the leone (Text D, paragraph [4]).

Using an AD/AS diagram, explain how the increase in the price of fuel might have contributed to inflation (Text D, paragraph [5]).

Using a poverty cycle diagram, explain how the provision of free primary and secondary education may help households break the poverty cycle (Text E, paragraph [2]).

Using a demand and supply diagram, explain how modern farming practices could affect the market for rice (Text E, paragraph [3]).

Using information from the texts/data and your knowledge of economics, evaluate the impact of government intervention in promoting economic growth and economic development in Sierra Leone.

Current account balance in 2017 = 974 − 1796 − 101 + 400 = –523 [1]
Current account balance in 2018 = 714 − 1603 – 112 + 324 = −677 [1]
Change = (−677−(−523)) = −(US)$154 million [1]

An answer of −(US)$154 million or “a wider deficit (US)$154 million” without workings is sufficient for [1].

OFR applies provided at least one of the current account balances is correct.

(3617 − 3497)/3497 × 100 % [1]

Any valid working should be rewarded with [1]

= 3.43 % [1]

Award [1] for the correct economic growth rate without workings or without the % sign or for a figure rounded to less than 2 dp.

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

For an exchange rate diagram, the vertical axis may be exchange rate, price of the leone in US$, US$/leone or US$ per leone. The horizontal axis should be quantity, or quantity of leones. A title is not necessary.

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

For AD/AS, the vertical axis may be Average (General) Price Level, or Price Level. The horizontal axis may be real output, real national output, real income, real national income, real GDP or real Y. The SRAS curve may be labelled AS. Any abbreviation of the previous terms is acceptable. A title is not necessary.

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

The use of P and Q on the axes is sufficient for a demand and supply diagram. A title is not necessary.

Command term
“Evaluate” requires candidates to make an appraisal by weighing up the strengths and limitations. Opinions and conclusions should be presented clearly and supported with appropriate evidence and sound argument.

Responses may include:

• a definition of economic growth.
• a definition of economic development.
• an explanation of the sources of economic growth and development.
• an explanation of the link between economic growth and development.

Budget deficit (Text D, paragraph [7])

• The government has reduced the budget deficit, and this will slow the increase in the government debt, reducing the future debt burden (Text D, paragraph [7]).
• The reduction in the budget deficit could mean that there will be less government spending on social welfare negatively impacting economic development.
• The government maintains a budget deficit and this could have an expansionary impact on AD, leading to economic growth since injections (government spending) remain higher than withdrawals (taxes). Economic growth may lead to development.
• The government is still borrowing from banks and this leads to crowding out (Text F, paragraph [1]). However, this would not affect foreign investment.

Removal of fuel subsidy (Text D, paragraph [5])

• This will have a disproportionate impact on those in poverty who are already adversely affected by the high inflation rate (Text D, paragraph [5]).
• This may lead to cost-push inflation.
• It will help reduce government spending and close the budget deficit (Text D, paragraph [7])
• This would help reduce the negative externalities/market failure associated with the burning of fossil fuels and reduce pollution.
• This could lead to higher energy and transportation costs for businesses and may dampen efforts to diversify the economy.

Provision of healthcare services in tandem with the private sector and NGOs (Text D, paragraph [6])

• It improves access to, and quality of public health and increases the productivity of workers.
• Reliance on the private sector and NGOs avoids adding to the mounting public debt (Text D, paragraph [7]).

Fight against corruption (Text D, paragraph [8])

• This will help bring in foreign investment and may make the country more credible in taking loans with multilateral organisations such as the World Bank and the IMF. This would help increase access to foreign aid (Text D, paragraph [8]).

Free primary and secondary education, inclusive of technical education (text E, paragraph 2 and 4)

• This will help households break the poverty trap as more income can be used to spend on necessities and capital equipment (Text E, paragraph [2]).
• This will have an impact on the empowerment of women (Text E, paragraph [2]).
• Productivity will increase in the agricultural sector, ensuring food security (Text E, paragraph [3]) and reduce the price of rice and other food items (Text E, paragraph [4]).
• This will promote diversification (Text E, paragraph [4]) and reduce structural unemployment, particularly amongst youths (Text D, paragraph [8]).
• This may worsen the budget deficit and increase government debt in the short term (Text D, paragraph [7]).

Improvement in infrastructure

• This will help attract MNCs (Text F, paragraph [1]) and allow for the development of the manufacturing sector (Text E, paragraph [4]), which could help achieve diversification. This would reduce volatility in export revenue and promote economic growth (Text D, paragraph [2]) and it may help reduce the current account deficit (Table 3).
• This reduces unemployment (Text D, paragraph [8]) and prevents rural-urban migration if manufacturing takes place in rural areas.
• This could worsen the budget deficit and increase the government debt (Text D, paragraph [7]).

Tax benefits for foreign investment

• This would help diversify the economy by developing the tourism sector (Text F, paragraph [2]).
  Excessive reliance on foreign investment might lead to a loss of sovereignty as many essential services are provided by MNCs (Text F, paragraph [2]).
• MNCs might exploit resources (Text F, paragraph [2]) and labour.
• The increase in FDI inflows could help compensate for the current account deficit (Table 3, answer to (b)(i)) through the financial account. MNCs would also provide an export market which would increase the export revenue and reduce the current account deficit. The overall increase in the balance of payments could prevent further depreciation of the currency.
• However, the repayment of profit and interest might widen the deficit on the net income account (Table 3).

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

Most candidates achieved full marks on the definition of GDP. Those who missed the second mark were often those who defined the concept as the ‘number’ or ‘total amount’ instead of the ‘value’ of final goods and services produced in a country. On the other hand, very few candidates could provide the precise dimensions of the IHDI.

A surprising number of candidates did not know how to calculate a current account balance, often missing components in their workings or adding every item in the table. On the other hand, most could calculate the economic growth rate correctly. Those who did not score 2 marks on (b)(ii) were often those who did not show their workings or rounded the figure to less than 2 decimal places.

Most candidates did well for this question. Some lost one mark due to poor labelling of the horizontal axis, as was the case for question 1 (e), and/or a vague explanation – the direct link between the export revenue and the demand for the leone was often stated but not explained (e.g. that less foreigners would need to exchange their currency to pay for exports from Sierra Leone and this would thus lead to a fall in the demand for the leone).

This was another well attempted question as most candidates could establish that the higher price of fuel would lead to higher cost-push inflation and that was very often accompanied by an adequate AS/AS diagram reflecting the leftward shift of the SRAS. However, quite a few candidates mixed up microeconomic and macroeconomic contents in their explanations. A number explained a fall in the supply of oil instead a fall in SRAS. There were cases of AD/AS diagrams with a correct leftward shift of the SRAS but with ‘price of fuel’ and ‘quantity of fuel’ as labels for the axes.

This proved to be amongst the most challenging questions to candidates. Although a variety of poverty cycles were acceptable for this question, some candidates could not score any marks for their diagram because they did not use economic terms (e.g. ‘no job’ or ‘no money’ instead of ‘low income’, ‘no education’ instead of ‘low human capital’) and/or did not draw a self-perpetuating cycle (one which clearly establishes that poverty reinforces itself). The explanation was often muddled as candidates struggled to explain how intervention would provide residents with skills to increase productivity, how the money saved could finance the purchase of capital goods and thus lead to higher physical capital, or any other way in which the provision of free education may help break the self-perpetuating cycle of poverty drawn.

The question did not seem to pose candidates any problem. The majority could establish that supply would increase, leading to lower prices and higher quantities. There were occasional loss of marks on the explanation as some candidates did not provide an adequate explanation for the increase in supply (e.g. increase in productivity, better quality factors of production).

Most candidates understood the difference between economic growth and economic development and could identify some relevant development issues such as the lack of diversification and the need for sustainable development. The responses which reached 10-12 marks and 13-15 marks were those where the discussion of implemented policies presented sufficient links to economic growth and development. Such links had to be explained rather than stated. It was not uncommon to read responses with some possibly good but unfortunately underdeveloped economic arguments. In such cases, a low score on the second descriptor often brought down the entire score as theory was ‘described’ rather than ‘explained’. Stronger responses distinguished between different types of government intervention/policies, while weaker responses only focused on one type of intervention/one specific policy (supply-side interventionist for example). A few candidates did not achieve high marks because their response mostly suggested/recommended policies (such as import substitution) rather than evaluating the impact of the intervention being implemented in Sierra Leone.