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Questions
22M.2.HL.TZ0.2
Text D — Overview of Malawi
Malawi is a landlocked country in southern Africa. Its development plans contain 169 targe
based on the Sustainable Development Goals. Ineffective institutions and inequalities,
however, make it difficult to reach every target. Although poverty in urban areas has
declined, the level of absolute poverty has been increasing in rural areas where 85 % of the
population lives. Causes of poverty include land degradation (80 % of the land is eroded o
lacks nutrients), poor healthcare and rapid population growth. There is also a lack of huma
capital, which is often due to the difficulties that households have in obtaining loans for
7%
education or training. Approximately 5 of households do not have access to formal
banking services.

B H
Aid agencies are providing assistance. The World ank’s uman Capital Project will increas
investment and encourage reforms, such as promoting the education of teenage girls. In
22 B S$ 7 % %
0 0, the World ank also approved U 15 million (50 as a loan and 50 as a grant) f
a government project. This project aims to increase sustainable land management practice
and build water-related infrastructure, such as small dams and irrigation schemes.

The government has encouraged the establishment of microfinance groups that act as rura
banks. They provide some finance and guidance for programmes that introduce new types
of crops and techniques in order to improve agricultural efficiency.

2 9
Although 01 was a difficult year due to drought, insect infestations, and a tropical cyclo
M GD %
alawi’s real gross domestic product ( P) grew by 4.5 . There is a large budget deficit
and the amount of government debt (at approximately 60 of % GD
P) is considered to be to
high. Therefore, the government has announced plans to reduce its spending. Inflation had
% 22 D
been forecast to increase to 14 in 0 0. ue to the planned contractionary fiscal policie
% 22
however, inflation may fall below 10 from 0 1 onwards.

Export revenues account for over 30 % of GDP. Malawi aims to increase its exports of cotto
nuts, tea and sugar. Rising exports and lower fuel import prices could reduce the current
account deficit. Despite the persistent trade deficit, Malawi is resisting calls for further trad
protection. It has signed bilateral trade agreements with both South Africa and Zimbabwe
Tariffs are gradually being reduced, while other indirect and direct taxes are being raised.
Text E — Agricultural Production
%
Approximately 80 of the labour force is employed in agriculture, with few job
opportunities available in manufacturing and services. Agricultural productivity is low for
many reasons. The government promotes manufacturing industries and cultivation of crops
H
for export by large-scale farms. owever, small-scale and subsistence farmers have receive
F
little support in the past. armers use less fertilizer and irrigation than is typical in other
O %
countries. nly 3 of cultivated land is irrigated, compared to the global average of 1 . 2%
O ther challenges are the inadequate road and rail links to markets and the limited availabil
of electricity and fuel.

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 Maize is the most important staple food in Malawi. The government uses price controls wh
11/23/25, 11:39 PM QuestionBank Test

trying to ensure that maize is available at affordable prices for low-income households.
However, the maximum price set by the government is often too low to persuade farmers
supply the maize or to provide them with sufficient revenue. In 2020, the maximum price
was raised from 250 to 310 kwacha per kilogram. Even at the higher price, shortages rema

The government is planning to invest in commercial agriculture to improve productivity an

22
promote diversification. The 0 0 budget includes subsidies on fertilizer for 4.3 million sm
scale farmers, which could possibly double maize output but may also pollute waterways.
M
The support given to farmers will improve the nutrition of alawians and stimulate the rura
economy.

Text F — Tobacco Exports

M %
Tobacco is alawi’s major export, providing over 50 of foreign currency earnings. ue t D
lower global demand and the purchasing policies of multinational tobacco firms, prices pa
M
to farmers in alawi are low and falling. To reduce costs, farmers resort to using child labo
F S
ollowing allegations of labour exploitation, the United tates has restricted tobacco
M
imports from alawi. There is concern that other importing countries might also impose
restrictions.

Table 3: Economic data for Malawi

Table 4: Development data for Malawi

Text D United Nations Department of Economic and Social Affairs, 2020. Malawi 2020
Voluntary National Review Report For Sustainable Development Goals (SDGs) [online]
Available at:
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 :// / / /2 M M M
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https sustainabledevelopment.un.org content documents 6180 ain_ essages_ alawi.p

J 22 S
[Accessed uly 0 0]. ource adapted.

The World Bank, 2020. World Bank Approves $157 Million to Protect Malawi’s Watershed
and Improve Rural
Livelihoods [online] Available at: https://www.worldbank.org/en/news/press-
release/2020/07/06/world-bank-approves-157-million-to-protect-malawis-watersheds-and
improve-rural-livelihoods [Accessed July 2020]. Source adapted.

Text E Chilunga, Z., 2020. Government increases maize prices from K250 to K310 per kg
[online] Available at: https://www.nyasatimes.com/government-increases-maize-prices-from
k250-to-k310-per-kg/ [Accessed July 2020]. Source adapted.

Fabricius, P., 2020. Malawi sets stellar example with push for food security [online] Availab
at: https://www.
businesslive.co.za/bd/opinion/2020-07-13-peter-fabricius-malawi-sets-stellar-example-with
push-for-food-security/ [Accessed July 2020]. Source adapted.

Text F AFP, 2019. US restricts tobacco imports from Malawi over labour abuses [online]
Available at: https://www.
theeastafrican.co.ke/business/US-restricts-tobacco-imports-from-Malawi-over-labour-
abuses/2560-5369826-
vhw4q7z/index.html [Accessed July 2020]. Source adapted.

Table 3 World Bank Data Bank, World Development Indicators n.d. [online] Available at:
https://databank.worldbank.org/reports.aspx?source=2&country=MW [Accessed July 2020
Source adapted.
Table 4 World Bank Data Bank, World Development Indicators, n.d. [online] Available at:
https://databank.worldbank.org/
reports.aspx?source=2&country=MW [Accessed July 2020]. Source adapted.

a.i. List two of the Sustainable Development Goals (Text D, paragraph [1]). [2]

a.ii. Define the term tariffs indicated in bold in the text (Text D, paragraph [5]).

[2]

b.i.

Sketch a production possibilities curve (PPC) diagram to show the effect of

improved human capital on Malawi’s potential output (Text D, paragraph [2]).

[3]

b.ii.

Using information from Table 3, calculate real GDP (at 2010 prices) in 2019 using
the price deflator.

2
[ ]

c.

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Using a poverty cycle diagram, explain how an increase in funds for the education
of teenage girls could break the poverty cycle (Text D, paragraph [2]).

[4]

d.

D/ S
Using an A A diagram, explain how a reduction in government spending may
reduce inflation (Text D, paragraph [4]).

[4]

e.

Using an exchange rate diagram, explain how a reduction in the current account
deficit could affect the exchange rate for the kwacha (Text D, paragraph [5]).

[4]

f.

Using a demand and supply diagram, explain how the rise in the maximum price of
maize would change the welfare loss associated with the maximum price (Text E,
paragraph [2]).

[4]

g.

/
Using information from the texts data and your knowledge of economics, evaluate
the government’s policies to promote economic growth and economic
M
development in alawi.

[15]

22M.2.SL.TZ0.2
Text D — Overview of Sierra Leone
Sierra Leone is located on the west coast of Africa. Economic activity is concentrated on
agriculture and mining, which together contribute 70 % of gross domestic product
(GDP) and 77 % of export revenue.
Economic growth rates fluctuated from +20.1 % in 2013 to −21.5 % in 2015. The
economic slowdown in China contributed to a significant drop in mining activities and a
fall in Sierra Leone’s export revenue. China is Sierra Leone’s largest market for exported
minerals.

Economic growth rates in Sierra Leone have improved in recent years due to increased
activity in agriculture, mining and construction. Increased employment in these labour-
intensive sectors could help reduce poverty, which remains widespread in the country.
S L H D
ierra eone’s ranking in the Inequality adjusted uman evelopment Index (I I) is HD
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very low.

% S
The fall in export revenue has led to a 50 depreciation of the leone ( ierra eone’s L
E
currency) over the past five years. ven recent increases in the price of commodities
have not been sufficient to offset the high import expenditure on food, medication, cars
and capital equipment.

The depreciation of the leone has led to inflationary pressures. The removal of a fuel
subsidy resulted in an increase in the price of fuel and pushed the inflation rate from
% 2
16.8 in 018 to 1 . 7 2% 2 9
in 01 .

To make matters worse, access to essential, life-saving health care services in ierra S
L H S L
eone is often disrupted by regional conflicts. ealthcare in ierra eone is generally
charged for and is provided by a mixture of government, private and non-governmental
organizations ( NGO NGO
s). s are relied on to protect the health and wellbeing of citizens.
NGO s help to achieve this by distributing medicine and teaching families about hygiene
and proper sanitation.

Another area of concern is the government debt, which stood at 6 of 2 % GD 2 9

P in 01 .
The government has reduced its budget deficit from 5. 7%
to 3.4 of % GD
P by
minimizing non-payment of taxes and implementing cost-saving measures such as the
automation of some government services.

The newly elected government has made good progress in its fight against corruption,
F
but it is facing many macroeconomic challenges. oreign aid has been reduced,
infrastructure is inadequate and many economic activities remain untaxed. outh Y
unemployment is also high due to low literacy rates and a lack of skills required in the
job market.

Text E — Sierra Leone’s new development plan

2 9 S L
In 01 , the government of ierra eone introduced a new five-year development plan.
S L
The plan includes policies aimed at increasing the welfare of ierra eone’s citizens by
S D
working towards the ustainable evelopment oals. G
The development plan ensures access to free primary and secondary education in all
public schools. The cost of education is the main reason that many households are not
F
sending their children, particularly girls, to school. or those paying private education
fees, switching to public education would allow more of their household income to be
spent on other essential services and farming equipment.

The expected increase in human capital should facilitate economic activities and lead to
S
investment. chools now teach modern farming practices, such as those involving the
use of farm machinery and fertilizers. These would benefit rice farmers and help achieve
food security (ensuring people have access to enough food).

The provision of technical education should not only increase agricultural output but
also allow for the diversification of the economy. The manufacturing sector contributes
only 2%of the country’sGD P and could provide an alternative source of employment.
The five-year plan also addresses the lack of infrastructure, in particular for electricity
generation, which has so far restricted the development of the manufacturing sector.

Text F — Investment in Sierra Leone

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B S L 9 2
The World ank ranked ierra eone 160th among 1 0 countries in 018 for the ease of
doing business, citing difficulties in accessing electricity and in obtaining loans and
G
business permits. overnment borrowing from the banking sector has increased in
recent years, resulting in high interest rates and limited credit availability for the private
F
sector. oreign investors, however, usually bring capital from abroad.

Despite the challenges, Sierra Leone offers significant opportunities for investment.
Foreign investors are involved in the energy sector, infrastructure, agriculture, tourism,
and natural resources. Reduced tax rates on corporate income are offered for
investments in agriculture and tourism.

Table 3: Economic data for Sierra Leone

[Text E: Sustainable Development Goals Knowledge Platform, n.d. [online] Available at:
https://sustainabledevelopment.
un.org/memberstates/sierraleone [Accessed 20 April 2021]. Source adapted.

Text F: U.S. Department of State, n.d. 2018 Investment Climate Statements: Sierra Leone
[online] Available at:
https://www.state.gov/reports/2018-investment-climate-statements/sierra-leone/
[Accessed 20 April 2021].
Source adapted.
Table 3: Data from The World Bank [online] Available at: https://data.worldbank.org/
[Accessed 20 April 2021]. Source adapted.]

a.i.

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

2
[ ]

a.ii.

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

2
[ ]

b.i.
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 S L
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Using the information in Table 3, calculate the change in ierra eone’s current
2 7 2
account balance from 01 to 018.

[3]

b.ii.

S L
Using the information in Table 3, calculate ierra eone’s rate of economic growth
2 7
between 01 and 018.2
2
[ ]

c.

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

[4]

d.

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

[4]

e.

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]).

[4]

f.

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

[4]

g.

/
Using information from the texts data and your knowledge of economics, evaluate
the impact of government intervention in promoting economic growth and
S
economic development in ierra eone.L
[15]

21N.2.HL.TZ0.4
New policies for Brazil

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 From 2010 to 2014, Brazil experienced an economic boom with annual gross domestic
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product (GDP) growth of 8 %. During this time, the government spent heavily on social
programmes (including cash transfers and pensions) that helped millions to get out of
the poverty cycle. The poverty rate decreased from 22 % to 9 % and the Gini coefficient
dropped from 0.581 to 0.515. However, the spending on social programmes resulted in
fiscal deficits and a large public debt, which is currently 80 % of GDP.

In 2015, Brazil entered a recession that lasted until 2017. During the recession GDP
declined by an average of 3 % per year. By 2017, the number of Brazilians living in
absolute poverty climbed by 13 %, inequality worsened, and unemployment was 12 %.
From late 2017 to 2019, Brazil struggled to recover, with only approximately 1 % annual
economic growth.

Some economists blamed the slow recovery on the lack of investment in education and
technology during the economic boom. According to those economists, investment in
human and physical capital was necessary to improve productivity and decrease the
H
reliance on the production of primary commodities. istorically, spending on education
has not been effective in reaching the very poor.

2
In 018, a newly elected government, aiming to stimulate economic growth, introduced
S B
market-oriented policies. ince razil has a large economy, the new government
B
believed that razil should take advantage of world trade and foreign investment to
boost economic growth and achieve economic development.

The new government aimed to increase the number of multinational corporations

MN
( B F
Cs) investing in razil through deregulation and trade liberalization. urthermore, in
220 0 several state-owned enterprises were privatized.

Additionally, new labour market and tax reforms were introduced to create jobs,
increase labour force participation and make it easier for firms to hire and fire workers.
The reforms included increasing the retirement age and reducing transfer payments.
H owever, trade unions claim that the reforms are unfair and will lead to the exploitation
of workers.

There is concern that deregulation, privatization and market liberalization will put
B
pressure on razil’s environment, threaten sustainable development, and benefit only
2 7
urban areas. In 01 , the government introduced “green GDP” as an official measure and
committed to environmental protection goals. This is necessary because, for example,
%
over 40 of the population live in areas without access to a sewage system and
manufacturing companies are dumping untreated wastewater in rivers, contributing to
water pollution.

a.i.

Define the term multinational corporations indicated in bold in the text (paragraph
[5]).
2
[ ]

a.ii. Define the term green GDP indicated in bold in the text (paragraph [7]). [2]

b.

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 2 2 9
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Using a business cycle diagram from 010 to 01 , explain how cyclical

unemployment may have changed during the economic boom (paragraph [1]) and
B
the recession (paragraph [2]) in razil.

[4]

c.

B
Using an externalities diagram, explain how manufacturing companies in razil are
contributing to market failure (paragraph [7]).

[4]

d.

/
Using information from the text data and your knowledge of economics, evaluate
B
the impact of market-oriented policies on economic development in razil.

[8]

17M.2.SL.TZ0.04
Sri Lanka’s economic reforms

S L 2 2 9
After ri anka’s 5-year civil war ended in 00 it became one of the world’s fast-
S
growing emerging markets, helped by billions of U dollars worth of infrastructure
S L
investment from China. ri anka’s new government plans to implement a range of
S L
market-oriented policies to open up its financial system, liberalize the ri ankan rupee
S L
( ri anka’s currency) and make new trade deals with both India and China.

Sri Lankan economists and corporate leaders are urging “tough” economic decisions,
reducing the bureaucracy and eliminating costly inefficiencies in state enterprises. 300
state-owned firms dominate the economy, and there is pressure for them to enhance
O
their competitiveness. ne realistic option is a policy of privatization. Another policy is
the establishment of 46 economic zones across the country with low tax rates. This
should encourage the private sector to invest in setting up these zones.

Improving infrastructure is also a priority. Power supply is unreliable and broadband

speeds are slow in rural areas.

S L
Another priority is to reduce controls on exchanging currency. ri ankans find it difficult
to obtain foreign exchange, limiting tourism and business overseas. Improving access to
foreign currencies would make people’s lives easier and encourage more business.

On a positive note, improved international relations has increased tourism. To take

advantage of this, the government should now implement a strategy to further promote
tourism.

2%
A major challenge for the government is that more than 5 of the population lives
below U S$2 %
.50 per day. This is caused largely by the fact that 30 of the population is
%
involved in agriculture, which contributes less than 10 of gross domestic product. In
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addition, tackling youth unemployment and increasing household incomes are

challenges.

But perhaps the greatest problem confronting the government is the country’s massive
debt burden, which is equivalent to 700% of its tax revenue. This creates a significant
debt servicing problem, especially because much of the debt is foreign owned.

S L
Another problem is a current account crisis. ri anka needs to replace its reliance on
S L
payments from ri ankans employed overseas with export revenues. And instead of
relying on borrowing from overseas to finance its current account deficit, the country
needs to attract foreign direct investment.

There is also a need for the government to try to improve the ability for companies to
do business, such as by reducing the time it takes to register a business and by
improving access to credit for small companies, which would significantly stimulate the
B
economy. usiness confidence has to improve in order to stimulate new investments
and economic growth.

S : S S L 2
[ ources adapted from unday Times, ri anka, www.sundaytimes.lk, 3 August 015, 2
and

James Crabtree, 2015, Sri Lanka plans ‘big bang’ reforms, Financial Times, www.ft.com,
19 August. Used under licence from the Financial Times. All Rights Reserved.]

a.i. List two characteristics of an economically less developed country. [2]

a.ii. Define the term privatization indicated in bold in the text (paragraph 2). [2]

b.

Using a production possibilities curve (PPC) diagram, explain how “billions of U S

dollars worth of infrastructure investment from China” may affect potential
economic output (paragraph 1).

[4]

c.

Using a definition of the term opportunity cost and information from the text,
explain how the servicing of debt has an opportunity cost that may affect
S L
economic development in ri anka.

[4]

d.

/
Using information from the text data and your knowledge of economics, discuss
S L
the possible effects of the proposed market-oriented reforms on ri anka’s
economic development.

[8]

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17M.2.HL.TZ0.03
Indonesia’s economy

Indonesians hope that their new president will be able to speed up reforms to stimulate
economic growth and economic development. These reforms include upgrading
infrastructure, reducing red tape (excessive regulations) and reducing corruption. It is
also hoped that he will increase Indonesia’s global competitiveness, create new jobs
and educate one of the world’s youngest workforces.

Some government policies are already being implemented. These include a large power
plant construction programme, tax incentives to infant industries and tax cuts for
industries like transport, telecommunications, metal production and agricultural
processing. In addition, there has been a decision to reduce fuel subsidies in order to
contribute funds towards the government’s record U S$22 billion investment in
infrastructure projects. The subsidies had kept fuel prices low in a country where millions
of people live in poverty.

Despite the policies, Indonesia is struggling. Economic growth is slow and consumer
confidence has deteriorated. Indonesia’s main export commodities are coal, gold and
palm oil, for which prices have fallen. The inflation rate is 7.26%, which is above the
central bank’s target range of 3 to 5%. Slower growth in the world economy makes the
situation even worse for Indonesia’s struggling economy.

Economists have said that the president must put his efforts into improving export
competitiveness by making investments in education and training.

The costs of doing business in Indonesia are high due to paperwork and confusing
regulations. The government has adopted policies to improve this. These policies aim to
create certainty and transparency for foreign investors and to empower small
O
businesses, which play a critical part in Indonesia’s economy. ther policies, such as
obtaining loans and encouraging micro-credit institutions, make it easier to gain access
to credit.

Trade protection and intervention are increasing as policymakers look to reduce

imports, manage markets and promote domestic industries.

Figure 1 – Indonesian development statistics

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S : B S
[ ources adapted from World ank and tatistics Indonesia ;
S
www.legalbusinessonline.com, accessed 18 eptember 015 www.indonesia- 2 ;
2 2 ;
investments.com, accessed 3 August 015 www.hdr.undp.org, accessed 3 August 2
2 ; 9 2 ;
015 www.bloombergview.com, accessed August 015 www.reuters.com, accessed
9 2 ;
August 015 www.lowyinterpreter.org, accessed 3 August 015 and 2 2
www.data.worldbank.org, accessed 3 August 015] 2 2

* signifies no data available

a.i. Define the term infrastructure indicated in bold in the text (paragraph 1). [2]
a.ii. Define the term micro-credit indicated in bold in the text (paragraph 5). [2]
b.

Using a demand and supply diagram, explain the impact on the market for fuel of
the government’s decision to reduce fuel subsidies (paragraph 2).

[4]

c.

Using a production possibilities curve (PPC) diagram, explain how “the

government’s record U S$22
billion investment in infrastructure projects” will affect
Indonesia’s production possibilities (paragraph 2).

[4]

d.

/
Using information from the text data and your knowledge of economics, discuss
the possible impacts of market-oriented and interventionist policies on Indonesia’s
economic development.

[8]

16N.2.HL.TZ0.3
Inequality in China

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As China’s economy first began to use market-oriented policies in the 1 0s, it was
famously suggested that some citizens, particularly through hard work, “should be
allowed to get rich before others”. The government still plays a dominant role in the
allocation of resources and benefits, keeping most of the gains for itself and its
employees. Civil servants, who are assigned government housing, have benefited more
and accumulated more wealth than the private sector employees.

Income inequality is a politically sensitive issue in China and the government has not
2 9 G
reported on it for 6 years. In 1 88, the ini coefficient was 0.38 and the next set of
2
figures released in 014 give a value of 0.4 . 7
R F RF
According to research by the China eform oundation (C ), “hidden income” amounts
S$
to more than U 1.4 trillion, or the equivalent of Australia’s annual gross domestic
GD H
product ( P). “ idden incomes” refer to money gained from bribery or other corrupt
behaviour, for example, bribes for officials or corrupt payments for doctors.

Low-income households are stuck with an outdated tax system that fails to address the
inequality issue. They carry the burden of tax payments while the rich and powerful
operate largely outside the tax system. Low-income households also have difficulty
accessing credit.

Although the Chinese government expenditure is high, there tends to be inadequate

spending on social protection programmes relating to health and old age. The lack of
MS
social protection has resulted in a high marginal propensity to save ( P ) amongst the
low-income households as they put money away to provide for future health, education
and retirement needs. The high savings result in a low marginal propensity to consume
at 3 7% %
of household income (compared to an average of more than 50 of household
income in more developed-market economies). The low marginal propensity to consume
and the associated high savings rate have received significant attention in domestic and
international policy circles and are viewed as a key barrier to China’s continuing road to
development.

a.i.

Define the term market-oriented policies indicated in bold in the text

(paragraph [1]).

2
[ ]

c.

With reference to the figures on the marginal propensity to consume

(paragraph [5]), explain how the value of the multiplier in China would compare
with the value of the multiplier in a more developed-market economy (no
calculation required).

[4]

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19M.2.SL.TZ0.4

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Chinese investment helps Peru to develop

Over the past decade, Peru has been one of South America’s fastest-growing
economies, with an average economic growth rate of 5.9 % and low average annual
inflation of 2.9 %. This has been mostly due to a favourable external environment,
sensible macroeconomic policies and reforms of environmental regulations designed to
increase investment in Peru’s profitable mining sector. However, the deregulation in the
mining sector has been opposed by environmental groups and trade unions, fearing
increased pollution and poorer working conditions.

Strong growth in employment and income has dramatically reduced poverty rates.
Absolute poverty fell from 27.6 % in 2005 to 9 % in 2015.
Gross domestic product (GDP) growth continued to accelerate in 2016, very much
helped by higher mining export output as several new large mining projects entered
into production and reached full capacity. Peru mines and exports many commodities,
including copper, gold, lead, zinc, tin, iron ore, silver, and oil and petroleum products.

22 %
China is Peru’s main trading partner, taking .1 of Peru’s exports and supplying . 22 7
% 2
of their imports in 016. Chinese companies are also significant suppliers of foreign
direct investment (FDI) to Peru, recently investing over U billion to purchase aS$2
hydroelectric power plant. The second main trading partner is the United tates (U ), S S
taking 15. 2%
of Peru’s exports and supplying 0. 2 7%
of their imports in 016. 2
Peru’s current account deficit declined significantly from 4. to .8 of 9 % 2 % GD 2
P in 016,
owing to increasing export growth and lower imports. Peru’s government continues to
; 2
support a free trade policy since 006, Peru has signed trade deals with 1 different 7
S J
countries including the U , Canada, China and apan. In addition, a trade deal has also
E
been signed with the uropean Union.

Real GDP growth is expected to slow slightly in 2017 due to an anticipated lower
growth rate in the mining sector and weak private investment. To support the economy
as mining production slows, the government is expected to increase public investment
in 01 .2 7
Growth projections may not be achieved if any, or a combination, of the following occur:
external shocks in commodities prices, a further deceleration of China’s economic
growth, unpredictability in world capital markets and the threat of tight monetary policy
SR
in the U . aising economic growth requires structural and fiscal reforms to improve
productivity, reduce the size of the informal sector and improve the efficiency of public
services.

S : B
[ ource adapted from “The World ank Country verview Peru”, O :
:// / / /
http www.worldbank.org en country peru overview, 1 April / 7
2017; F :// / /
and “The World actbook”, https www.cia.gov library publications the-world- /
/ /
factbook geos pe.html, 6 eptember 01 ] S 2 7
a.i. Define the term absolute poverty indicated in bold in the text (paragraph [2]).
[2]

a.ii.
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 Define the term foreign direct investment (FDI) indicated in bold in the text
11/23/25, 11:39 PM QuestionBank Test

(paragraph [4]).

2
[ ]

b.

Explain two reasons why Chinese companies may have been attracted into Peru
(paragraph [4]).

[4]

c.

Using a poverty cycle diagram, explain how increased foreign direct investment
might break the cycle (paragraph [4]).

[4]

d.

/
Using information from the text data and your knowledge of economics, evaluate
the factors that may allow Peru to continue to achieve high rates of economic
growth in the future.

[8]

19M.2.SL.TZ0.3
Bhutan’s growth soars amid hydropower building boom
Bhutan is a developing Asian country, bordered by India and China. The government of
Bhutan is mostly interventionist in its approach to economic growth and economic
development. Situated in the Himalayan mountains, Bhutan has significant water
resources that may be employed to generate hydropower.

The most significant intervention by the government is investment in the generation of

H
hydropower. owever, funding is not possible domestically. The hydropower projects
G
are mostly financed by concessional long-term loans from India. overnment borrowing
B
to finance hydropower construction has made hutan the second-most indebted nation
B %
in Asia. hutan now has a high level of government debt, equal to 118 of annual real
gross domestic product (GDP).
B
The funding of hutan’s interventionist policies has created significant dependence on
Indian tied aid. A condition of the aid is that Indian companies lead the infrastructure
projects. The large amount of foreign aid has made achieving self-reliance difficult. At
B
present, India finances nearly one-quarter of the hutan government’s budget
expenditures.

B
When the projects are completed they will more than double hutan’s hydropower
%
generation capacity and over 80 of the power generated will be exported to India.
H B
ydropower to India is hutan’s largest export, and the increased exports will lead to
about:blank 16/85
 R GDP growth is expected to reach 11.7 % by 2019.
11/23/25, 11:39 PM QuestionBank Test

greater government revenue. eal

Another significant intervention by the government is the promotion of university

education for as many young people as possible, coupled with the creation of
government jobs to employ them. The present level of exporting hydropower to India
has provided some government revenue to pay for government jobs. owever, while H
the number of university graduates is growing each year, the number of government
jobs has not been growing at the same rate.

In response to the current inability to provide enough jobs, the government is also
F
implementing other programmes. irstly, they are encouraging graduates to pursue
B
employment in hutan’s small private sector, which is struggling to make a meaningful
S
contribution to economic growth. econdly, the government is promoting tourism,
making it one of the most popular alternatives to government employment. Thirdly, the
government is attempting to reduce red tape (excessive regulations) in areas such as
industrial licensing, trade, labour markets and finance. This red tape is a barrier to
F
foreign direct investment. inally, the government is trying to make employment in
B
agriculture more appealing. hutan’s climate means that it could be well-positioned to
produce and export a variety of fruits.

S :
[ ource adapted from Central Intelligence Agency, The World actbook, hutan, F B
:// //
https www.cia.gov library publications theworld- /
/ / 9 2 7;
factbook geos bt.html, accessed 1 August 01 White-collared, by oss Adkin, 31 R
August 016, imal outhasian, 2 H S
:// /
http himalmag.com white-collared-bhutan-thimphu-bureaucrats, accessed 1 August 9
2 7;
01 The World ank hutan, B :B
://
https data.worldbank.org country bhutan, / / ©2 9
01 The World ank roup, licenced B G
under the Creative Commons Attribution
L :// /
4.0 International icense, https creativecommons.org licenses by 4.0 and hutan / / ; B
growth soars amid hydropower building
N G
boom, by idup yeltshen and Phuntsho Wangdi, August 1 , 01 , 72 7
:// /E /B
https asia.nikkei.com conomy hutan-growth-soarsamid-
hydropower-building-boom, accessed 1 August 01 ] 9 2 7
a.i.

Define the term concessional long-term loans indicated in bold in the text
(paragraph [2]).

2
[ ]

a.ii.

Define the term real gross domestic product (GDP) indicated in bold in the text
(paragraph [2]).

2
[ ]

b.

Explain two possible disadvantages for Bhutan in receiving India’s tied aid
(paragraph [3]).

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11/23/25, 11:39 PM QuestionBank Test

[4]

c.

Using a production possibilities curve (PPC) diagram, explain how rising numbers
B
of university graduates will affect hutan’s potential output (paragraph [5]).

[4]

d.

/
Using information from the text data and your knowledge of economics, evaluate
B
the government policies being used to promote economic development in hutan.

[8]

20N.2.HL.TZ0.4
Fiji’s challenges and opportunities
2 F
In 016, the island nation of iji suffered from cyclone Winston (a tropical storm), costing
O
more than 40 lives and damaging its infrastructure. ne of the country’s four sugar mills
was severely damaged, harming raw sugar processing. Processed sugar is, in addition to
F
bottled water and tourism, a major export in iji. A recent study found that the damage
from the cyclone continues to have a lasting effect on communities as fisherwomen
report fewer and smaller crabs and fishes. The social safety net is limited and there are
calls for the government to help the citizens who have been affected by the cyclone.
H owever, the government had to use its budget to rebuild infrastructure.

The government has prepared several strategies to strengthen the economy. These
include financial support for sugar cane producers, diversification of its agricultural
produce, better access to finance and encouragement of investment. The government
:
has committed to provide equal opportunities for all promoting the participation of
F
women in education and political leadership, because iji has one of the lowest female
participation rates in politics in the world.

%
To support its sugar cane farmers, the government provides a 55 subsidy on
H
pesticides (products that kill weeds) used in farming. owever, small farmers are
complaining about the excessive paperwork that needs to be completed to receive the
F B
subsidy and there is potential for corruption. iji competes with razil, which has an
absolute advantage, in the world market for sugar.
To diversify, the government plans to expand the ginger and coconut industries. oth B
industries are economically and environmentally sustainable. The industries provide an
F
increased number of ijians with a worthwhile income. Coconut production plays a very
F
important role in iji’s economy, particularly in the more isolated rural communities,
where formal employment is scarce and where alternative cash crops (crops grown to
be sold for profit) do not exist. Coconut is a staple food and is vital for food security
(ensuring that people have access to enough food), but is also important for health,
N
economic and cultural reasons. ew market opportunities have emerged in high-value
–
products green coconut products, such as coconut water, are becoming increasingly

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11/23/25, 11:39 PM QuestionBank Test

popular throughout the world.

D B F
The Asian evelopment ank encourages ijian farmers to access “green finance”. These
financial investments support economic development through sustainable development
initiatives and policies. Under the government’s new reforms, farmers are able to use
assets such as crops and contracts as collateral for loans, creating improved access to
H
finance. owever, to increase incomes, farmers will also need to improve their financial
knowledge.

To create an investment-friendly environment, the government must develop more

infrastructure, create market access through greater economic integration and reduce
asymmetric information between farmers and wholesale buyers. Australia has decided
F
to help iji by financing infrastructure through grants and concessional loans.

S : : F 2
[ ource Adapted from Chaudhary, ., 018. reen finance G –G
inger farmers explore
funding possibilities.
F :// /
The iji Times, https www.fijitimes.com green-finance-ginger-farmers-explore-funding-
possibilities ;
F 2 R F
and Chaudhary, ., 018. isk mitigation in the Pacific’s coconut sector. The iji Times,
:// /
https www.fijitimes.com risk-mitigation-in-the-pacifics-coconut-sector.]

a.i.

Define the term absolute advantage indicated in bold in the text (paragraph [3]).
2
[ ]

a.ii.

Define the term asymmetric information indicated in bold in the text (paragraph
[6]).
2
[ ]

b.

Using a costs diagram, explain how the expansion of the coconut industry could
lead to economies of scale (paragraph [4]).

[4]

c.

F
Using a production possibility curve (PPC) diagram, explain how damage to iji’s
infrastructure has affected its production possibilities (paragraph [1]).

[4]

d.

/
Using information from the text data and your knowledge of economics, discuss
the view that government intervention is the best way to achieve economic
development in iji. F
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11/23/25, 11:39 PM QuestionBank Test

[8]

21M.2.SL.TZ0.3
Angola’s economic reforms
Following an oil price crash in 2014, Angola has endured a recession, a dramatic rise in
inflation and empty supermarket shelves caused by severe shortages of foreign
currency. Angola is highly dependent on export revenues from oil production, a major
S
source of United tates dollars. The foreign currency is needed to import manufactured
goods because the country’s manufacturing sector is small.

To respond to these challenges, the president of Angola has presented a plan with
desperately needed reforms to promote economic development. The plan proposes tax
incentives to attract foreign investment and privatization of the telecommunication and
railway sectors. It also aims to expand infrastructure projects with private sector
involvement. In addition, reforms are recommended to make the banking sector
stronger. This is important if the government wants to reduce the borrowing costs
experienced by Angolan businesses.

2 %
The recent 0 devaluation of the kwanza (Angola’s currency) is another sign that the
government is serious about making Angola attractive to foreign direct investment ( I). FD
Angola has a fixed exchange rate. As the kwanza has been overvalued, this has caused a
reduction in foreign currency reserves.

Angola’s future economic growth is likely to be low. The business environment for firms
H
remains difficult. igh borrowing costs, corruption and poor infrastructure remain
challenges. The government has failed to exploit Angola’s vast agricultural potential. The
country depends heavily on oil revenues, which are falling.

Living conditions for households are also poor as inflation is expected to remain above
25 %. Approximately 40 % of Angolans live in absolute poverty and unemployment is
high, especially in rural areas. Aware of the urgent need to reduce regional inequality,
the government has announced plans to encourage investment in rural areas. However,
there are also proposals to reduce public debt by removing some subsidies on food and
by introducing ad valorem taxes.

Although Angola’s economic growth has been slow, it remains the third-largest
S
economy in sub- aharan Africa and the government is the second-largest public
spender in the region.

S :B D 2 L ç
[ ource usiness ay, 018. President ouren o’s economic reforms are making Angola
: :// / / /2 2
attractive. Available at https www. businesslive.co.za bd opinion 018-0 -16-president-
/# 9J
lourenos-economic-reforms-are-making-angola-attractive [accessed 1 anuary 01 ]. 2 9
S
ource adapted.

F N 2 2
A P, ews 4, 018. Angola president vows investment drive, graft fight. Available at :
:// 2 / /N /
https www.news 4.com Africa ews angola-president-vows-investment-drive-graft-
2 9J 2 9 S
fight- 0181015 [accessed 1 anuary 01 ]. ource adapted.]

a.i. Define the term recession indicated in bold in the text (paragraph [1]). 2
[ ]

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11/23/25, 11:39 PM QuestionBank Test

a.ii. Define the term privatization indicated in bold in the text (paragraph [2]).
[ ] 2
b.

Using a demand and supply diagram, explain the impact on households of

“removing some subsidies on food” (paragraph [5]).

[4]

c.

L
Using a orenz curve diagram, explain the likely impact on income distribution of
“plans to encourage investment in rural areas” (paragraph [5]).

[4]

d.

/
Using information from the text data and your knowledge of economics, evaluate
the effectiveness of market-oriented policies in achieving economic development
in Angola.

[8]

21M.2.HL.TZ0.3
Can the Democratic Republic of the Congo achieve its economic potential?
D R DR
The emocratic epublic of the Congo ( C) is a nation of great potential. It has large
mineral resources and an abundance of fertile land. The mining and export of cobalt,
copper and gold are the main source of government revenue. owever, the abundance H
of natural resources causes devastating conflicts as rebel groups fight for control of the
DR C’s resources. With a population of 80 million and gross domestic product (GDP) per
S$ 7 DR
capita of only U 45 , the C is one of the world’s poorest nations. It is ranked 1 6 in 7
H D
the world in terms of the uman evelopment Index ( I). HD
The government has been accused of relying too much on tariffs, but to improve living
standards, the government needs revenue to spend on agriculture, electricity and roads.
Furthermore, business owners in the DR
C complain of corruption and increasing “red
tape” (excessive regulations).

The government believes that a strong agricultural sector could boost economic growth
% R
but only 10 of the land is used for farming. ice, maize and other crops grow well in
S$
the tropical climate and yet the government spends U 1 billion per year importing
basic foods. According to a government spokesperson, the lack of infrastructure is a
major barrier to the processing and transporting of agricultural products. The C’s DR
road network is so bad that farmers and traders often make a two-week trip in small
R
boats down the Congo iver to sell their produce. The C has just DR
8 kilometres 27 77
9
(km) of roads. It is estimated that 0 000 km of national roads and 150 000 km of rural

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11/23/25, 11:39 PM QuestionBank Test

roads must be built.

B
In addition, the World ank reports that only 1 7%
of the DR
C’s population has access to
R
electricity, despite the capacity of the Congo iver to generate enough electricity to
satisfy the needs of the region.

To make matters worse, the regional conflicts have affected the availability of healthcare
services. It is estimated that half of the health centres have been looted*, burnt or
G
destroyed. overnment expenditure on healthcare per capita remains one of the lowest
N
in the world. on-governmental organizations ( NGO
s) are relied on to protect the health
and wellbeing of citizens. NGO
s help to achieve this by distributing medicine and
teaching families about hygiene and proper sanitation.

:
*looted goods stolen from a place, typically during a war or riot

S : Médecins Sans Frontières/Doctors Without Borders (MSF), 2017. D. R. Congo:

[ ource
Urgent need for aid in the rural areas
of Kasai. [online] Available at: https://prezly.msf.org.uk/d-r-congo-urgent-need-for-aid-in-
the-rural-areas-of-kasai#.

AFP, News24, 2018. Restive DRC’s big challenge - fulfilling economic potential. [online]
Available at:
https://www.news24.com/Africa/News/restive-drcs-big-challenge-fulfilling-economic-
potential-20181003
[accessed 3 October 2018]. Source adapted.]

a.i.

Define the term gross domestic product (GDP) per capita indicated in bold in the
text (paragraph [1]).

[ ]2
a.ii. List two components of the Human Development Index (HDI) (paragraph [1]).
[2]

b.

Using an externalities diagram, explain the benefits of hygiene and sanitation

education programmes (paragraph [5]).

[4]

c.

Using a production possibilities curve (PPC) diagram, explain how the production
possibilities (potential output) of the DR
C might be affected if there were greater
access to electricity (paragraph [4]).

[4]

d.

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 /
11/23/25, 11:39 PM QuestionBank Test

Using information from the text data and your knowledge of economics, evaluate
the effectiveness of interventionist policies as a means of achieving economic
development in the DR
C.

[8]

22M.3.HL.TZ0.1
Burundi is a landlocked country in Central Africa. Its economy is heavily reliant on the
agricultural sector, which employs 92 % of the labour force but contributes only 40 % of
gross domestic product (GDP). Most of the 11.5 million population live in poverty,
especially in rural areas. The level of food insecurity (people without access to enough
food) is almost twice as high as the average for sub-Saharan African countries with more
than 60 % of the population living below the poverty line.

Infrastructure in Burundi is poor. There are no railroads and only three major routes
through the country, two of which involve water transport, across Lake Tanganyika.
Access to clean water is low, while fewer than 5 % of the population have access to
electricity. The literacy rate for those aged 15 and over is 61.6 %, while only 1 % of
secondary schools have access to the internet.

Table 1: Labour market data for Burundi (2019)

Government finance
B 2 9
The budget deficit of urundi increased in 01 , partly due to an inefficient system for
B
collection of taxes. Tax rates in urundi are given in Table 2.

Table 2

* Top rates of personal income tax in other countries are often much higher,
7 2 % in Sweden and 35 % in Mexico.
such as 5 .

A firm in Burundi paid 32 000 Burundi francs (Fbu), including VAT, in order to purchase a
piece of industrial equipment. The rate of VAT for this equipment is 20 %.

Gender inequality in Burundi

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 Table 3 illustrates selected indicators of gender inequality in Burundi compared with
11/23/25, 11:39 PM QuestionBank Test

Mexico and Sweden.

Table 3

Approximately 92 % of the labour force are employed in agriculture, which contributes

% B
40 of urundi’s GDP.
Trade
B 2 % 7 %
The main exports of urundi in 018 were gold (41.4 ), coffee (1 .3 ) and tea ( .5 ), 9 %
7 %
while refined petroleum (1 .3 ) was its main import. Although the current account
deficit was reduced to 10 of% GD 2 9 P in 01 , there remains a huge imbalance between
R
exports and imports. eserve assets do not cover more than one month of imports,
FD
while the economy relies on foreign aid and foreign direct investment ( I) to finance
the deficit. The low level of foreign aid is likely to be insufficient to finance the deficit.

On the upside, Burundi has an abundance of minerals, including 6 % of the world’s nickel
reserves. It is the only African country producing rare-earth minerals, which are used in
many hi-tech products, such as smartphones. The United States (US) has been keen to
diversify its supply of rare-earth minerals because of its trade dispute with China.

Figure 1 shows the market for gold in Burundi. Dd and Sd represent the yearly domestic
S S
demand and supply functions for gold, while w and w1 represent the world supply of
2 9 22 S
gold in 01 and 0 0 respectively. The price of gold is measured in U dollars (U ) S$
S$ S$
per ounce (oz). The world price increased from U 1500 per oz to U 1800 per oz
J 2 9 J 22
between uly 01 and uly 0 0.

Figure 1

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S : N D 22 N F
[ ource United ations evelopment Programme, 0 0. The ext rontier uman :H
D
evelopment and the Anthropocene [online] Available at :
:// / / / /
http hdr.undp.org sites default files Country-Profiles /BD 2
I.pdf [Accessed 0 April 0 0]. 22
S
ource adapted.

The World Bank, n.d. Population, total – Burundi [online] Available at:
https://data.worldbank.org/indicator/SP.POP.
TOTL?locations=BI [Accessed 20 April 2020]. Source adapted.

United Nations Development Programme, n.d. Human Development Reports [online]

Available at:
http://www.hdr.undp.org/en/countries/profiles/BDI [Accessed 20 April 2020]. Source
adapted.]

a.i.

Using the information provided in Table 1, calculate the rate of unemployment for
B 2 9
urundi in 01 .

[ ] 2
a.ii.

Explain why dependence on primary sector production may be considered a

barrier to economic development.

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11/23/25, 11:39 PM QuestionBank Test

[4]

a.iii.

Using the information in Figure 1, calculate the price elasticity of demand for gold
B S$
in urundi when price increases from U 1500 per oz to U 1800 per oz. S$
2
[ ]

a.iv.

B
Using the information in Figure 1, calculate the change in the value of urundi’s
S$
gold exports resulting from the increase in the price of gold from U 1500 per oz
S$
to U 1800 per oz.

2
[ ]

a.v. Define the term progressive tax. [2]

a.vi.

V
Calculate the amount of AT which was paid on the purchase of this equipment.

2
[ ]

a.vii.

Sketch an AD/AS diagram to illustrate the possible effect on the Burundian

economy in the long run if the government reduces the rate of corporate income
tax from 30 % to 26 %.

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 2
11/23/25, 11:39 PM QuestionBank Test

[ ]

a.viii.

With reference to the data in Table 3, explain two ways in which gender inequality
B
might act as a barrier to economic development in urundi.

[4]

b.

/
Using the text data provided and your knowledge of economics, recommend a
B
policy which could be introduced by the government of urundi to reduce income
B
inequality in urundi.

[10]

22M.1.SL.TZ0.3
a.

Explain how political and social factors can act as barriers to economic growth and
economic development.

[10]

b.

Using real-world examples, discuss the significance of economic barriers for a

country’s economic growth and economic development.

[15]

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Markschemes
22M.2.HL.TZ0.2
a.i.

a.ii.

b.i. The diagram has three requirements : correctly labelled PPC diagram
two PPC curves drawn
shift to the right is clearly shown

Candidates who incorrectly label diagrams can be awarded a maximum of [2].

about:blank 28/85
 For a PPC diagram, there must be two goods or groups of goods competing for the
11/23/25, 11:39 PM QuestionBank Test

same resources on the axes. Good X and Good Y are appropriate, but simply X and Y
are not sufficient. A title is not necessary.

2
Clear labelling of the PPC curves such as PPC1 PPC is sufficient to indicate the shift
to the right.

Labelling PPC diagram with P and Q or PL and RGDP are fundamental errors thus zero
marks.

b.ii. 29 882
389 . 6
= 7669.92
× 100 Any valid working should be rewarded with [1]

S $ 7669.92 million
(U )

An answer of 7 669.92, without workings, without units or incorrect units, is sufficient

for [1].

If the answer is rounded up, it cannot be awarded [1]. It has to be given correctly to 2
decimal places (in line with the examination “Instructions to candidates”).

c.

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11/23/25, 11:39 PM QuestionBank Test

The wording in the boxes may be different, so long as it is equivalent. No title is

necessary.

d.

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

For AD/AS diagram, the vertical axis may be Average (general) price level or price
level. The horizontal axis may be real output, real national output, real national
income, real GDP or real Y. Any abbreviation of the previous terms is acceptable. A
title is not necessary.

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11/23/25, 11:39 PM QuestionBank Test

K S
An answer may alternatively draw a eynesian A curve, with the original intersection
D S S
of A and A being in the upward sloping portion of the A curve. Alternatively, the
S L
original intersection may be in the horizontal section of the A curve and the P may
not fall. This can receive full marks if the explanation states that due to high
/ M
unemployment spare capacity in alawi, contractionary fiscal policy will not be able
to reduce inflation.

e.

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11/23/25, 11:39 PM QuestionBank Test

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

For an exchange rate diagram, the vertical axis may be exchange rate, price of
kwacha in other currencies, other currency/ kwacha or other currency per kwacha.
The horizontal axis should be quantity or quantity of kwacha. A title is not necessary.

N.B. Acceptable alternatives are the supply curve shifting left or both curves shifting.

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11/23/25, 11:39 PM QuestionBank Test

f.

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

For a demand and supply diagram, the vertical axis should be price or p. The
horizontal axis should be quantity or q. A title is not necessary.

about:blank 33/85
11/23/25, 11:39 PM QuestionBank Test

Accept any annotation that clearly shows the change in welfare loss.

g.

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11/23/25, 11:39 PM QuestionBank Test

N.B. Answers that only deal with development or only deal with growth should be
awarded a maximum of level 3.

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

about:blank 35/85
 :
11/23/25, 11:39 PM QuestionBank Test

Answers may include definition of development

definition of growth.

Economic Models / theories may include

an explanation of the links between growth and development
D/ S
an A A diagram
a poverty cycle diagram
a diagram showing the effects of lowering tariffs
PPC
indicators of development.

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11/23/25, 11:39 PM QuestionBank Test

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

22M.2.SL.TZ0.2
a.i.

a.ii.

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11/23/25, 11:39 PM QuestionBank Test

b.i. 2 7 = 97 − 79 −
Current account balance in 01 4 1 6 101 + 400 = –523 [1]
2 = 7 − – 2 2 = −677 [1]
Current account balance in 018 14 1603 11 + 3 4
= − 77− − 2 = − S $
Change ( 6 ( 5 3)) (U ) 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.
b.ii. (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.

c.

about:blank 38/85
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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.

d.

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11/23/25, 11:39 PM QuestionBank Test

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.

e.

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11/23/25, 11:39 PM QuestionBank Test

f.

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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.

g.

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11/23/25, 11:39 PM QuestionBank Test

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

Responses may include:

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11/23/25, 11:39 PM QuestionBank Test

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
D
impact on A , leading to economic growth since injections (government spending)
E
remain higher than withdrawals (taxes). conomic growth may lead to development.
The government is still borrowing from banks and this leads to crowding out (Text F,
H
paragraph [1]). owever, 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.
R eliance on the private sector and NGO s 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
B MF
taking loans with multilateral organisations such as the World ank and the I . 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]).
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11/23/25, 11:39 PM QuestionBank Test

This may worsen the budget deficit and increase government debt in the short term
(Text D, paragraph [7]).

Improvement in infrastructure
MN
This will help attract Cs (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]).
E xcessive reliance on foreign investment might lead to a loss of sovereignty as many
essential services are provided by MN Cs (Text F, paragraph [2]).
MN Cs might exploit resources (Text F, paragraph [2]) and labour.
The increase inFD I inflows could help compensate for the current account deficit
(Table 3, answer to (b)(i)) through the financial account. MN
Cs 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.
H owever, 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.

21N.2.HL.TZ0.4
a.i.

a.ii.

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b.

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

For a business cycle diagram, the vertical axis should be (Real) GDP, (Real) GDP
growth/%, level of economic activity, (Real) output. The horizontal axis should be time
and show dates from 2010–19. A title is not necessary.

If a student labels growth and shows a recession as positive the student can not be
awarded full marks.

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11/23/25, 11:39 PM QuestionBank Test

c.

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

The y axis may be labelled price but could be costs or benefits and the x axis labelled
quantity.

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d.

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
E
“ valuate” requires candidates to make an appraisal by weighing up the strengths
O
and limitations. pinions and conclusions should be presented clearly and supported
with appropriate evidence and sound argument.

Answers may include : Definitions of:

Economic development.
Market-orientated policies.
Economic analysis, focusing on economic development, may include:
AD/AS analysis. Positive outcomes on economic development may include:
Poverty cycle.
Lorenz curve.
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 Externalities.
11/23/25, 11:39 PM QuestionBank Test

Labour reforms (raising retirement age), may increase the size of the labour force,
which may increase LRAS as quantity of labour has increased. This may increase
LRAS, leading to increased real GDP/potential output, which may increase job
opportunities and increase income, for low income earners and encourage economic
development (paragraph [6]).
Lowering business costs through labour reforms, making the hiring and firing of
S
employees easier, may increase A , leading to increased real GD
P and a possibility of
more employment opportunities for low income earners.
Privatization may decrease public debt and government can redirect spending into
economic development (paragraph [5]).
M / –
ore multinationals foreign investment may lead to more jobs (paragraph [4]).
Trade liberalization may lead to lower prices for consumers, more choice (paragraph
[5]).
M ay promote diversification and move away from commodities (paragraph [1]).
Encouraging more competition from MN
Cs may promote more efficiency (paragraph
[5]).
Negative outcomes on economic development may include:
Spending on education in the past has been ineffective (paragraph [3]).
Labour reforms decreasing standard of living through lower job security (paragraph
[4]).
Privatization may increase prices of goods and services / cause unemployment as
private firms aim for efficiency and profit maximization (paragraph [5]).
Multinationals repatriate profits and may not employ local people (paragraph [5]).
Some industries may suffer from increased competition due to trade liberalization
(paragraph [3]).
Concern of environment destruction and externalities (paragraph [7]).
Increasing the retirement age may decrease standards of living (paragraph [6]).
Inequalities may occur through market-orientated policies.
D ual economy can develop as a result of market-orientated policies.

Any reasonable evaluation.

17M.2.SL.TZ0.04
a.i.

Level
0 The work does not meet a standard described by the descriptors below. [0]

V
1 ague definition. [1]

For listing one of the following characteristics:

low levels of GDP per capita
high levels of poverty
relatively large agricultural sector
large informal sectors

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high birth rates (population growth rates)

poor infrastructure
underdeveloped capital markets (banking sector)
heavily indebted
unable to access international markets
over-specialized on a narrow range of products
small tax base
dependency on primary sector exports.

2 Accurate definition. [2]

For listing two of the following characteristics:
low levels of GDP per capita
high levels of poverty
relatively large agricultural sector
large informal sectors
high birth rates (population growth rates)
poor infrastructure
underdeveloped capital markets (banking sector)
heavily indebted
unable to access international markets
over-specialized on a narrow range of products
small tax base
dependency on primary sector exports.

a.ii. Level
0 The work does not meet a standard described by the descriptors below. [0]

V
1 ague definition. [1]

The idea that it is when the government no longer owns a company.

2 Accurate definition. [2]

/
An explanation that the government sells state-owned enterprises (assets firms) plus
one of the following :
to the private sector
to raise revenue.

b. Level
0 The work does not meet a standard described by the descriptors below. [0]

1 There is a correct diagram or an accurate written response. [1–2]

For drawing a PPC (outward shift) showing an increase in the potential output in Sri
Lanka or for an explanation that China’s investment in infrastructure would likely
improve the quality and/or the quantity of the factor of production capital and
therefore may increase production possibilities (potential economic output).
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 2 There is a correct diagram and an accurate written response. [3–4]
11/23/25, 11:39 PM QuestionBank Test

For drawing a PPC (outward shift) showing an increase in the potential output in Sri
Lanka and for an explanation that China’s investment in infrastructure would likely
improve the quality and/or the quantity of the factor of production capital and
therefore may increase production possibilities (potential economic output).

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

For PPC, there must be two goods or groups of goods competing for the same
resources on the axes. Good A and Good B would be sufficient.

c. Level
0 The work does not meet a standard described by the descriptors below. [0]

1 There is a correct diagram or an accurate written response. [1–2]

For a correct definition of opportunity cost or for an explanation that money spent on
debt servicing in Sri Lanka will reduce the government’s ability to spend on achieving
development objectives, such as infrastructure spending, reducing youth
unemployment, increasing household incomes.

2 There is a correct diagram and an accurate written response. [3–4]

For a correct definition of opportunity cost and for an explanation that money spent
on debt servicing in Sri Lanka will reduce the government’s ability to spend on
achieving development objectives, such as infrastructure spending, reducing youth
unemployment, increasing household incomes.

d.

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.

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 Level
11/23/25, 11:39 PM QuestionBank Test

0 The work does not meet a standard described by the descriptors below. [0]

F
1 ew relevant concepts are recognized.
/
There is basic knowledge understanding. [1–2]

2 Relevant concepts are recognized and developed in reasonable depth.

There is clear knowledge/understanding.
There is some attempt at application/analysis. [3–5]

3 Relevant concepts are recognized and developed in reasonable depth.

There is clear knowledge/understanding.
There is effective application/analysis.
There is synthesis/evaluation, supported by appropriate theory and evidence. [6–8]

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

Responses may include: definition of economic development

/
definition of market-oriented reforms policies.

Possible positive effects :

investing in infrastructure (paragraph 1) to improve infrastructure (paragraph 3),
reducing the cost of economic activity
opening up financial system (paragraph 1) may encourage foreign banks and
increased lending to business, thus increased capital formation in the long-run,
LR S
possible shift in A to the right
liberalizing the currency (paragraph 1 and 4) allows for greater access to credit and
encourages tourism and business (paragraph 5)
trade deals (liberalization) (paragraph 1) may promote export growth, reducing
current account deficit, creating (youth) employment and increasing household
incomes (paragraph 6)
reducing bureaucracy (paragraph 2) which would reduce the cost of doing business
privatization of state-owned enterprise may lead to greater efficiency and more
reliable power supply in the energy generation industry (paragraph 2 and 3)
supporting industry efficiency
creating 46 economic zones with low tax rates may encourage FD
I leading to
D
increased A and job creation to tackle high youth unemployment (paragraph 2)
creation of economic zones likely to increase manufacturing and industrialization
encouraging a shift away from low income agricultural jobs to higher income
manufacturing jobs thereby tackling the large percentage of the population living on
less than U S$2 .50 per day (paragraph 2)
potential for increased government revenue to repay debt by privatizing state-owned
enterprises (paragraph 2)
export-led growth and the attraction of FD S L
I (paragraph 8) - ri anka is actively
encouraging FD D
I so trade and investment are likely to increase, thus increasing A ,
/ LR S
and or A , and possibly breaking the poverty trap
easier for businesses to register (paragraph 9)
improving access to credit for small companies and increasing long-run potential
–
output creates jobs (paragraph 9).
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 :
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Possible negative effects

increased unemployment
privatizations of utilities could result in higher utility prices thus harming low income
households
possible negative externalities created by the opening of the economic zones
possibility of increased income inequality in the distribution of income
privatized firms may have monopoly power
FD I may lead to more outflows of incomes on the current account
liberalization of currency markets (paragraph 4) may lead to capital flight (outflows on
financial account).

Any reasonable discussion.

17M.2.HL.TZ0.03
a.i.

Level
0 The work does not meet a standard described by the descriptors below. [0]

V
1 ague definition. [1]

The idea that it is (any one of the following is sufficient) :

large scale services or facilities of a country
necessary for economic activity
add to the capital stock of a nation
usually supplied by the government.

2 Accurate definition. [2]

An explanation that it is (any two of the following is sufficient) :
large scale services or facilities of a country
necessary for economic activity
add to the capital stock of a nation
usually supplied by the government.

a.ii. Level
0 The work does not meet a standard described by the descriptors below. [0]

The idea that it is a small loan. 2 Accurate definition. [2]

V
1 ague definition. [1]

An explanation that it is a small loan, plus one further descriptor, such as :

micro-credit allows poor people to set up a small scale business
micro-credit is loaned to borrowers who do not have security collateral /
at a low rate of interest.

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b. Level
0 The work does not meet a standard described by the descriptors below. [0]

1 There is a correct diagram or an accurate written response. [1–2]

For drawing a correctly labelled demand and supply diagram with a shift of the
supply curve to the left and a higher price and lower quantity or for explaining that
the reduction in fuel subsidies will lead to increased costs and so a fall in supply with
a higher price and a lower quantity.

2 There is a correct diagram and an accurate written response. [3–4]

For drawing a correctly labelled demand and supply diagram with a shift of the
supply curve to the left and a higher price and lower quantity and for explaining that
the reduction in fuel subsidies will lead to increased costs and so a fall in supply with
a higher price and a lower quantity.

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

For a demand and supply diagram, the vertical axis should be price or p. The
horizontal axis should be quantity or q. A title is not necessary.

c. Level
0 The work does not meet a standard described by the descriptors below. [0]

1 There is a correct diagram or an accurate written response. [1–2]

For drawing a PPC (outward shift) showing an increase in production possibilities in

Indonesia or for explaining that the government’s record US$22 billion investment in
infrastructure projects would likely improve the quality and/or the quantity of the
factors of production (capital) and therefore may increase production possibilities
and/or potential economic output.

2 There is a correct diagram and an accurate written response. [3–4]

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 For drawing a PPC (outward shift) showing an increase in production possibilities in
11/23/25, 11:39 PM QuestionBank Test

Indonesia and for explaining that the government’s record US$22 billion investment
in infrastructure projects would likely improve the quality and/or the quantity of the
factors of production (capital) and therefore may increase production possibilities
and/or potential economic output.

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

An alternate approach would be to explain that improved infrastructure allows firms

to make more efficient use of their factors of production, leading to increased
production possibilities.

For a PPC diagram, there must be two goods or groups of goods competing for the
same resources on the axes. Good X and Good Y are appropriate, but simply X and Y
are not sufficient.

d.

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.

Level
0 The work does not meet a standard described by the descriptors below. [0]

F
1 ew relevant concepts are recognized.
/
There is basic knowledge understanding. [1–2]

2 Relevant concepts are recognized and developed in reasonable depth.

There is clear knowledge/understanding.
There is some attempt at application/analysis. [3–5]

3 Relevant concepts are recognized and developed in reasonable depth.

There is clear knowledge/understanding.
There is effective application/analysis.
There is synthesis/evaluation, supported by appropriate theory and evidence. [6–8]

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

Responses may include:

definition of economic development
explanation of supply-side policies
/
explanation definition of interventionist policies (paragraph 1, 2 and 5)
/
explanation definition of market-oriented supply side policies (paragraph 1 and 2)
:
examples of market-oriented policies reducing red tape, tax cuts, tax incentives,
reducing fuel subsidies
:
examples of interventionist policies infrastructure projects, investment in education
and training, increased trade protection, access to micro-credit.

Benefits of government intervention:

–
government spending on infrastructure “upgrading infrastructure” (paragraph 1)
including power plants (paragraph 2) which could lead to increased growth and can
contribute to economic development
“create new jobs” (paragraph 1), more employment leads to economic growth /
higher incomes, a reduction in the unemployment rate and thus contributes to
economic development
“educate one of the world's youngest workforces” (paragraph 1), this would allow the
young workforce to get better paid jobs and support their families better
increased access to credit and micro-credit (paragraph 5), this would allow
H
entrepreneurs to take out loans that otherwise they may not have access to. aving
access to credit might stimulate the number of small businesses in Indonesia (which
“play a critical part in Indonesia’s economy”, paragraph 5), allowing for increased
incomes and standards of living
–
increased trade protection (paragraph 6) this would allow domestic firms to set up,
;
or survive it protects already existing businesses from cheaper imports, allowing
;
economic growth to happen more employment contributes to economic
development.

Concerns (weaknesses of) about government intervention :

interventionist policies may lead to inefficiency, bureaucracy and corruption, which
hinder economic growth and economic development, which the citizens are hoping
the new president will reduce (paragraph 1)
budget implications of increased government spending, with possible implications for
future government spending on development objectives
poor planning of project and no long-term plans.

Benefits of market-oriented policies:

reducing red tape (paragraph 1), less bureaucracy and deregulation might lead to
more incentives to set up formal businesses, which may lead to economic growth and
;
economic development (more jobs) more (foreign) investment
tax cuts, tax incentives (paragraph 2), industries like transport, telecommunications,
metal production and agricultural processing, which are now promoted on a national
scale, which may lead to economic growth and economic development (through
more jobs)
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11/23/25, 11:39 PM QuestionBank Test

reducing corruption (paragraph 1), reducing costs for individuals and firms, more
opportunities for entrepreneurs, more formal businesses that pay tax.

Concerns (weaknesses of) about market-oriented policies :

reducing fuel subsidies (paragraph 2), allowing world prices to determine the price of
fuel (which might be seen as a necessity in Indonesia for transport, cooking), likely
will result in higher prices of this essential product. This could be problematic for the
2 F
8 million people in absolute poverty ( igure 1)
F
(greater) inequality, which already exists ( igure 1)
intervention may be necessary to provide merit goods, correct market failures, and
reduce poverty but market-oriented policies may be needed to ensure a high enough
rate of economic growth (which is already slow, paragraph 3).

Any reasonable discussion.

16N.2.HL.TZ0.3
a.i.

Level
0 The work does not reach a standard described by the descriptors below. [0]

V
1 ague definition. [1]
The idea that they are policies without government intervention.

2 Accurate definition. [2]

An explanation that they are policies that support the allocation of resources by
supply and demand (or the price mechanism) rather than through government
intervention in markets.

c. Level
0 The work does not reach a standard described by the descriptors below. [0]

1 There is limited understanding. [1–2]

F / /
or showing an understanding of the multiplier formula equation effect or for an
explanation that the value of the multiplier in China would be lower than that in a
more developed-market economy because the marginal propensity to consume
7
(0.3 ) is lower than the average of more developed market economies (0.5).

2 There is clear understanding. [3–4]

For showing an understanding of the multiplier formula/equation/effect and for an
explanation that the value of the multiplier in China would be lower than that in a
more developed-market economy because the marginal propensity to consume
7
(0.3 ) is lower than the average of more developed market economies (0.5).

An answer that contains only a correct formula for the multiplier should receive [1]
only.

For [4], some reference to the data must be included.

19M.2.SL.TZ0.4
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a.i.

a.ii.

b.

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c.

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Example of poverty cycle (any cycle, starting and ending with an indicator of poverty,
is acceptable):

d.

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.

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11/23/25, 11:39 PM QuestionBank Test

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

Responses may include: definition of economic growth.

Factors affecting economic growth:

deregulation should increase investment (paragraph [1]) and so will lead to an
D
increase in A and thus economic growth, however, there are the dangers of
pollution and poorer working conditions (paragraph [1])
growth could be limited if loose environmental regulations cause, for example,
pollution that harms health and therefore workers' productivity (paragraph [1])
growth in employment and income (paragraph [2]) should lead to increases in
D
consumption and so A , however, this will only continue if the economy keeps
growing
higher mining export volumes (paragraph [3]) should continue to provide economic
growth, however, this will be dependent on continued growth in the global economy
FD D
I (paragraph [4]) could fill the investment gap, shifting A and increasing economic
growth, however, FD I has several negative aspects and its continuation will be
dependent on the situation in the economies providing it, eg “deceleration of China’s
economic growth (paragraph [7])
free trade (paragraph [5]), with continued trade surpluses, will provide continued
economic growth, but is once again dependent on the state of the world economy
and on the trade policies of other countries
increased public investment (paragraph [6]) should create economic growth, but will
it be enough to outweigh “the lower growth rate in the mining sector and weak
private investment” (paragraph [6])
external shocks in commodities prices (paragraph [7]) could negatively affect future
export earnings
a further deceleration of China’s economic growth (paragraph [7]) could affect
demand for commodities from the main trading partner and FD
I (paragraph [4])
unpredictability in world capital markets (paragraph [7]) could affect investment
S
the threat of tight (contractionary) monetary policy in the U (paragraph [7]) could
S
lead to a slowdown in the U economy and hence reduce the demand for
commodities from the second main trading partner (paragraph [4])
S
tight (contractionary) monetary policy in the U (paragraph [7]) could lead to an
S
outflow of savings to the U , reducing funds available for investment in Peru.

To reach level 3, students must be aware of the particular situation in the economy of
Peru, not just present a discussion of growth factors in general.

19M.2.SL.TZ0.3
a.i.

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a.ii.

b.

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c.

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

For a PPC diagram, there must be two goods or groups of goods competing for the
same resources on the axes. Good X and Good Y are appropriate, but simply X and Y
are not sufficient.

d.

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.

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11/23/25, 11:39 PM QuestionBank Test

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

Responses may include:

definition of economic development
definition of any of the government policies mentioned in the discussion
(interventionist supply-side policies, diversification, deregulation, etc).

Strengths of policies:
may reduce market failure through the provision of hydroelectricity (paragraph [1])
increased power supplies (paragraph [4])
exploiting hydropower generates government revenue (paragraph [4])
increasing export revenue, helping to achieve high GD
P growth rates of 11. 7%
(paragraph [4])
number of university graduates is growing each year, supporting an increase in
quality of labour (paragraph [5])
creation of government jobs reduces unemployment (paragraph [5])
government is promoting tourism which may diversify the economy away from over-
reliance on hydroelectricity (paragraph [6])
potential growth of private sector with more graduates (paragraph [6])
promotion of tourism as an alternative to government employment (paragraph [6])
deregulation leading to increased FD I (paragraph [6])
promotion of agriculture as an alternative to government employment (paragraph
[6]).
Limitations of policies:
overdependence on India for funding, creating a significant government debt, 118 %
of realGD P (paragraph [2])
high debt means burden to future generations (paragraph [2])
overdependence on tied aid and Indian companies leading the work (paragraph [3])
the provision of government jobs may lead to crowding out in the private sector
(paragraph [6])
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returns on investment in human capital may be muted if graduates leave the country
due to the lack of employment opportunities (paragraph [5])
emphasis on agriculture may result in limited growth opportunities for exports in the
future, because in competition with many other economies and low income
elasticities of demand for primary products.

To reach level 3, students must clearly link their arguments to specific government
B
policies undertaken by the government of hutan.

20N.2.HL.TZ0.4
a.i.

a.ii.

b.

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

For a cost diagram, the vertical axis may be labelled Cost (C) or Average cost (AC) or
Long run average cost (LRAC). The horizontal axis may be labelled Quantity (Q) or
Output. A title is not necessary.

c.

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

For a PPC, the axes could be two alternative products, one on each axis, eg Good A &
Good B or Schools & Motor Cars; or two groups of products, eg Consumer Goods
and Producer Goods.

d.

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.

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11/23/25, 11:39 PM QuestionBank Test

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

Answers may include : Definition of economic development.

Economic analysis may include Poverty cycle
Lorenz curve
D/ S
A A diagram
Externality diagram
PPC.

Discussion that government intervention is the best way to achieve economic

development may include:

Financial support for sugar cane producers needed for diversification (paragraph [2])
needed for access to credit and to encourage investment.
The diversification supported through government intervention may lead to more
M
value-added products (paragraph [4]). ay result in more jobs, increasing household
income, raised standard of living as able to access basic necessities.
E ducation for women is highlighted as an area for development (paragraph [2]), leads
to improved human capital, productivity, increased incomes, access to health and
–
basic necessities raising living standards.
G overnment strategies are targeting equality for all, including gender equality
(paragraph [2])
S upport in coconut production vital for food security (paragraph [4]).
D
The investment (paragraph [2]) leads to A increase and increase in economic
growth, may lead to economic development if incomes and access to health and
education are improved.
/
The government provides subsidies on pesticides to support increase sugar
;
production (paragraph [3]) this may or may not result in more jobs, which could
increase household incomes and thereby standards of living.
G inger and coconut production are economically and environmentally sustainable
(paragraph [4]) which implies that they are efficient industries, but also
environmentally friendly, leading to sustainable growth and development.

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 Ginger and coconut production provide “worthwhile income” for an increasing
11/23/25, 11:39 PM QuestionBank Test

number of Fijians (paragraph [4]), leading to an increased standard of living and

breaking out of the poverty cycle.
Social safety net is limited; therefore, government intervention is needed (paragraph
[1]).
Infrastructure spending vital to support the tourism industry as a major export
(paragraph [1]), if exports decrease, economic growth decrease, leads to lower
employment opportunities.
G
“ reen finance” (paragraph [5]) would allow sustainable ginger and coconut farmers
to have access to credit and invest in their farms to make them more productive and
earn more income.
To improve information flows by reducing asymmetric information, would improve
information between farmers and middlemen (paragraph [6]). When farmers have
more information, they can make better economic decisions that benefit their families
in terms of income.

Discussion that government intervention may not be best way to achieve economic
development may include:

Intervention may not reach the very poor/those with limited resources. The subsidy
for pest control (paragraph [3]) requires excessive paperwork, so not all may benefit
from the support.
To be effective government intervention needs to be targeted to areas of need.
F S
armers’ financial literacy needs to be improved (paragraph [5]). o, access to credit
will only be effective if government can also provide education.
The government must develop major infrastructure (paragraph [6]), which will be
costly and take a long time to develop and will have opportunity costs.
Potential for corruption means government subsidies may not reach those who need
it (paragraph [3]).
S ubsidies for pesticides may create a negative externality (paragraph [3])
B F
razil has absolute advantage in sugar and is iji’s competitor, so the subsidies may
be better directed alternative development areas (paragraph [3]).

Students may offer alternative strategies to achieve economic development:

Trade liberalization and development might be better by creating market access
through greater economic integration (paragraph [6]), the export revenue earned
from this could be used to improve or build new infrastructure in the future, leading
to economic development for many in society.
G rants and concessional loans from Australia (paragraph [6])
E –
xport promotion new markets opportunities emerging as products such as
coconut water is becoming popular throughout the world (paragraph [4])
G D B
reen finance through Asian evelopment ank (paragraph [5]).

Any reasonable discussion.

To reach level 3, students must show awareness of the ways in which government
intervention impacts upon economic development (not simply discuss the
advantages and disadvantages of government intervention in
general). This means to link the evaluation to how it will reduce poverty, increase
living standards, reduce income inequalities and increase employment opportunities,
improve health and education indicators.

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21M.2.SL.TZ0.3
a.i.

a.ii.

b.

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

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 For a demand and supply diagram, the vertical axis should be price or P. The
11/23/25, 11:39 PM QuestionBank Test

horizontal axis should be quantity or Q. A title is not necessary.

c.

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

The two curves may be shown on one graph, or may be shown on two graphs. If
using two graphs, it must be clear the curve after investment is closer to the line of
equality than the previous one.

% GD
The vertical axis may be labelled (cumulative) of (national) income ( P and GNI
F
are valid alternatives to income but wealth is not acceptable). or the horizontal axis,
%
the label may be (cumulative) of
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 / /
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population people households. A title is not necessary. There must be a diagonal line,
but it is not a requirement that it is labelled. There should be labels (or arrow) to
L
indicate the difference between the two orenz curves (or direction of the change).

d.

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
E
“ valuate” requires candidates to make an appraisal by weighing up the strengths
and limitations.

Answers may include : Definition of market-oriented policies

Definition of economic development.
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 Strengths of market-oriented policies:
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Promotes growth and creates employment and possibly higher wages by attracting
foreign investment (paragraph [2])
D evaluing the exchange rate has reduced the need for foreign exchange reserves
(paragraph [3])
Privatization may lead to competition, lower costs and lower prices and more choice
for consumers (paragraph [2])
Privatization will provide revenue to the government to pay down debt or invest in
/
infrastructure and or social spending
E xpanding infrastructure projects with private sector involvement encourage FD I
(paragraph [2])
M arket-oriented policies may increase long run aggregate supply allowing inflation to
2%
fall below 5 (paragraph [5])
Tax incentives in rural areas would create jobs and reduce inequalities (paragraph [5])
R eforms of the banking sector will possibly make it easier for small-scale businesses
to get loans (paragraph [2]).

Limitations of market-oriented policies:

The privatization of railways and telecommunications may lead to higher prices for
consumers and more inequality
Incentive-based policies may not be sufficient to allow for diversification since
manufacturing base is small and likely underdeveloped (paragraph [1] and [4])
S topping subsidies on food and using ad valorem taxes will raise prices causing
inflation and inequality to worsen in the short term (paragraph [5])
M easures to reduce public debt could worsen income inequality
M arket-oriented policies (e.g. more inwardFD I) are unlikely to work without
complementary interventionist policies such as the building of infrastructure
(paragraph [4]) to support diversification
L ess intervention in the exchange rate may lead to depreciation and higher prices
/
and or less certainty for foreign investors
M arket-oriented policies may lead to externalities
E ncouraging more inward FD I and other investment will increase private sector debts
and debt-servicing costs, leading to less income available to spend on merit goods
M arket-oriented policies tend to lead to higher inequalities (e.g. through lower
wages).

Any reasonable evaluation.

21M.2.HL.TZ0.3
a.i.

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11/23/25, 11:39 PM QuestionBank Test

a.ii.

b.

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

The vertical axis can be price, costs or benefits. The horizontal axis is quantity. A title
is not necessary.

c.

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

For a PPC diagram, there must be two goods or groups of goods competing for the
same resources on the axes. Good X and Good Y are appropriate, but simply X and Y
are not sufficient.

d.

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.

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11/23/25, 11:39 PM QuestionBank Test

E
“ valuate” requires candidates to make an appraisal by weighing up the strengths
and limitations.

Responses may include: a definition of economic development

a definition of interventionist policies.

Economic analysis may include: poverty cycle

interventionist supply-side policies
trade protection
PPC
FD I.

Strengths of interventionist policies may include:

government could provide a social safety net as GDP per capita is low (paragraph [1])
government spending to encourage investment in agricultural sector (e.g. subsidies)
(paragraph [2])
increased spending in the agricultural sector will create jobs (paragraph [2])
increased spending in the agricultural sector will reduce reliance on imports and
improve food security
government provision of infrastructure in roads and cities encourages futureFD I
LR S F
which may create jobs (increase in A or PP ) (paragraph [3])
government building hydroelectric generation plants increases electricity access to
citizens and business and encourages FD I which creates jobs (paragraph [4])
tariffs can supply additional revenue for government spending (paragraph [2])
tariffs can protect infant industries particularly in agriculture (paragraph [2])
/
positive externalities welfare loss reduced when government increases healthcare
provision (paragraph [5]).

Limitations of interventionist policies may include:

overdependence on income from mining sector (paragraph [1])
increased government intervention may increase corruption (paragraph [2])
weak private sector means reduces potential to collect tax revenue
significant costs to budget to provide road and hydroelectricity infrastructure
(paragraph [3] and [4])
government investment in infrastructure may lead to high debt creating a burden to
future generations (paragraph [3] and [4])
increasing red tape discourages investment in the private sector (paragraph [2])
tariffs on imported inputs increases input costs for firms and reduces output
(paragraph [2]).
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To reach level 3, students must show awareness of the ways in which interventionist
policies will impact upon economic development (not simply discuss the advantages
and disadvantages of interventionist policies in general). This means to link the
evaluation to how they will reduce poverty, increase living standards, reduce income
inequalities and increase employment opportunities, improve health and education
indicators.

Any reasonable evaluation.

22M.3.HL.TZ0.1
a.i.
74 750
4 908 500 + 74 750
× 100

Any valid working should be rewarded with [1].

= 1.5%
An answer of 1.5 or 1.5 % without working is sufficient for [1].
N.B. An answer of 1.52 arises because of incorrect working and so should be awarded
[0].
a.ii.

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11/23/25, 11:39 PM QuestionBank Test

N.B. A response that links only to growth can be awarded a maximum of [3]. Similarly,
if development is merely stated, but not linked, then a maximum of [3] is awarded.

%Δ 𝑄 d
a.iii. PED = = -20
%Δ 𝑃 20

Any valid working (correct %Δ Qd or %Δ P, provided the formula is not inverted) is

sufficient for [1]

= −1 or 1 −
An answer of 1 or 1 without any valid working is sufficient for [1].

N.B. A response in which the formula is inverted should be awarded [0].

a.iv. = 1000 (70 − 25) × 1500 = 67 500 000
Initial value

New value = 1000 (85 − 20) × 1800 = 117 000 000

Any valid working (initial or final value) is sufficient for [1].

Change in value = US$117 million − US$67.5 million

= US$49.5 million or US$49 500 000
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 9 9 $9
11/23/25, 11:39 PM QuestionBank Test

An answer of 4 .5 or 4 .5 million or 4 .5 million without any valid working is

sufficient for [1].

N.B. For full marks to be awarded the response must provide valid working and
include correct units.

a.v.

a.vi. 2 / 2 × 0.2
(3 000 1. ) Any valid working should be rewarded with [1].

= Fbu 5333.33 An answer of 5333 without workings is sufficient for [1].

N.B. For full marks to be awarded the response must provide valid working and
include correct units.

a.vii.

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. Any abbreviation of the previous terms is acceptable. A
title is not necessary.

N.B. A Keynesian diagram with AS shifting to the right and showing a higher (full
/
employment potential) output level is also acceptable.
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A diagram which is not fully labelled may be awarded a maximum of [1].

a.viii.

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b.

Refer to paper 3 markbands, available under “your tests” tab > supplemental
materials.

Possible policies may include (but are not restricted to) :

a more progressive tax system
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11/23/25, 11:39 PM QuestionBank Test

investment in human capital (education or health)

policies to promote women’s empowerment
transfer payments
/
wider tax base (more effective tax collection reducing tax avoidance)
policies to reduce inequalities of opportunity
transfer payments
targeted spending on goods and services, including merit goods
policies to reduce discrimination
minimum wage legislation
any other valid policy.

N.B. If more than one policy is recommended, only the best policy should be
rewarded, unless the policies are shown to be complementary or if they are
/
compared contrasted with the student’s one chosen policy.

22M.1.SL.TZ0.3
a.

Marks should be allocated according to the paper 1 markbands for May 2022
forward, part A.

Answers may include :

:
Terminology political and social barriers, economic growth, economic development
E : /
xplanation of any possible political social barriers, which may inhibit growth and
development, such as gender inequality, lack of governance, corruption, unequal
political power and status, weak institutional framework involving the legal system,
ineffective taxation structures, the banking system and property rights
D : D/ S
iagram use of an A A diagram to illustrate economic growth, or a PPC or poverty
cycle diagram.

A maximum of [6] should be awarded if only economic growth or economic

development in the question item is addressed.

b.

Marks should be allocated according to the paper 1 markbands for May 2022
forward, part B.

Answers may include:

Terminology: economic barriers, economic growth, economic development

Explanation: of how economic barriers such as increasing economic inequality, lack of
access to infrastructure and appropriate technology, low levels of human capital,
overdependence on primary sector, lack of access to international markets, informal
economy, capital flight, indebtedness, geography, e.g. being landlocked and
/
climate disease may constrain growth and development
D : D/ S
iagram use of any relevant diagram such as PPC, poverty cycle, A A
S :
ynthesis (discuss) the degree to which the various economic barriers act as a barrier
;
to growth and development the relative importance of economic barriers as
/ ;
compared to political social barriers overall assessment

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 Examples: real-world examples of countries that have experienced economic barriers
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to growth and development.

Examiners should be flexible in the interpretation of the difference between economic

and political/social barriers.

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

N.B. It should be noted that definitions, theory, and examples that have already been
given in part (a), and then referred to in part (b), should be rewarded.

A maximum of [9] should be awarded if only economic growth or economic

development in the question item is addressed.

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