Economics 0455/23 May/June 2021: question paper and mark scheme

Mark scheme

1(a) Calculate, in $s, the contribution of the fishing industry to 1 Accept 2.2 bn. Morocco’s GDP in 2017. $ sign not essential. $2.18 billion / $2 180 000 000 1(b) Identify two macroeconomic aims, other than balance of 2 payments stability, that the Moroccan government could achieve through the Blue Economy. • Economic growth/sustainable economic growth/development/output • Create employment/ lower unemployment/ full employment • Reduce poverty • Improve livelihoods / improve living standards / improve quality of life 1(c) Explain why an increase in the global demand for fish could 2 reduce a deficit in Morocco’s current account of its balance of payment. Logical explanation which might include: Increase in global demand could lead to an increase in demand for Moroccan fish / more sales of Moroccan fish / increase supply of Moroccan fish (1) increasing exports (1) creating an inflow of money / raising export revenue (1) improve trade in goods balance/trade balance (1) balance out imports / exports may now equal imports / reduce gap between exports and imports (1). 1(d) Explain two causes of poverty amongst fishermen. 4 One mark for each cause identified and one mark for each explanation. Logical explanation which might include: Low wages (1) cannot afford necessities (1) such as food and One mark for unemployment. proper housing (1) high supply / low demand for fishermen (1). Structural unemployment (1) fishermen might not have the skills to take up other jobs (1) after the decline in the fishing industry in their area (1). Seasonal unemployment (1) may not be possible to catch fish throughout the year (1) instability of income (1). 1(e) Analyse whether GDP per head always increases when the 4 percentage (%) contribution of the primary sector increases. Coherent analysis which might include: Overview No / not always (1) if % contribution of the primary sector increases, GDP per head is lower (1). Supporting evidence e.g. Pakistan/India/Morocco have a high % contribution and low GDP per head (1), Germany has the lowest % contribution but second highest GDP per head (1) comparison e.g. Germany has a higher GDP per head than India but a smaller contribution from the primary sector (1). Exception There is an exception/on the other hand (1) e.g. Australia – higher % contribution than Germany, but higher GDP per head or e.g. Malaysia – higher % contribution than Bulgaria, but higher GDP (1). Comments High-income countries tend to have more resources concentrated in the secondary and tertiary sectors/tertiary sector (1) incomes tend to be higher in the secondary and tertiary sectors / lower in the primary sector (1). 1(f) Analyse how regulation of fishing could ensure economic (5) Also allow an approach based on how overfishing growth is sustained for future generations. may threaten sustainable economic growth. Coherent analysis which might include: Regulation could prevent people from overfishing (1) regulation is backed up by law / fines may be imposed (1) gives time for fish to breed / recover form overfishing (1) so that future generations will still have access to fish stock / maintain fish stocks (1) this means that future generations will still be able to generate revenue from fishing (1) which could lead to increased or sustained investment/consumption/exports (1) ensuring high total demand (1) Regulation on fishing could also help coastal tourism (1) protect the environment (1) increase revenue from tourism (1) as people visit areas of natural beauty (1). 1(g) Discuss whether or not subsidies to fishermen could help the 6 Apply this example to all questions with the Moroccan economy. command word DISCUSS Award up to 4 marks for logical reasons why it could, which might (1g, 1h, 2d, 3d, 4d and 5d) include: • subsidies will decrease cost of production (1) and enable Each point may be credited only once, on either Moroccan fishermen to use better technology / capital / / side of an argument, but separate development as equipment / enable them to take advantage of economies to how/why the outcome may differ is rewarded. of scale / engage in research & development (1) • increase their productivity (1) lead to an increase in supply Generic example Mark / output (1) price of Moroccan fish would decrease (1) this will increase competitiveness of Moroccan fishermen (1) Tax revenue may decrease 1 increase demand (1) create jobs / increase employment / reduce unemployment (1) increase exports / reduce because of reason e.g. incomes may 1 imports (1) improve the current account balance (1). be lower. • increase revenues/income of fishermen (1) investments / consumption (1) increase total demand (1) leading to Tax revenue may increase because 0 economic growth (1). incomes may be higher i.e. reverse of a previous argument. Up to 4 marks how subsidies to fisherman could not help the Moroccan economy: Tax revenue may increase because of 1 • opportunity cost for the government (1) may result in a a different reason i.e. not the reverse budget deficit (1) less spending on education / healthcare of a previous argument e.g. (1) decrease overall productivity of the economy (1) less government spending on subsidies economic growth (1). may stimulate the economy more than • subsidies may lead to complacency (1) may become spending on education. depended on subsidies (1) fishermen may not use the subsidies efficiently (1) may result in overfishing (1) may increase pollution / external costs (1). • Fishing industry only contributes 2% of GDP (1) even if it expands may not increase the country’s output significantly (1). • Competitiveness may not increase (1) prices might not decrease (1) other governments may subsidise their fishermen (1). 1(h) Discuss whether or not a reduction in trade protection by 6 other African countries would be beneficial for Morocco. Award up to 4 marks for logical reasons why it might be beneficial, which might include: • less protectionism will decrease the price of Moroccan exports (1) increase exports (1) improve current account balance (1) • less protectionism will allow Morocco to specialise more / enable it to concentrate on what it is best at producing (1) • demand for labour is derived demand (1), demand for domestic workers will increase (1) therefore unemployment decreases (1) income increases / poverty decreases (1) consumption of good and services can increase (1) more total demand (1) economic growth (1) • inflation may fall (1) lower cost of imported raw materials/imported capital goods (1). Award up to 4 marks for logical reasons why it might not be beneficial, which might include: • decreased protection might lead to other countries products decreasing in price as well (1), Moroccan goods may decrease in competitiveness (1) decrease the demand for Moroccan goods (1) increase in imports (1) • infant/sunrise industries may go out of business (1) unable to compete as not able to take full advantage of economies of scale (1) • sunset/declining industries may go out of business (1) likely to have high costs of production (1) • decrease the demand for workers (1) as less is produced (1) unemployment increases (1) less income (1) consumption of goods and services decrease (1) decreased total demand (1) less economic growth (1).

Mark scheme

2(a) Identify two indicators of living standards. 2 Accept other valid indicators of living standards. Two from e.g.: Accept GDP per head. Real GDP per head Human Development Index (HDI) healthcare education 2(b) Explain how a decrease in borrowing could reduce the chance 4 of high inflation. Logical explanation which might include: Decrease in borrowing means people’s purchasing power would reduce / less money to spend (1) would lead to less consumption / less spending (1) or investment (1) this could lead to a decrease in total demand (1). Bank lending would be reduced (1) the money supply may be reduced / less money in circulation / less money in the economy. (1) price of goods and services will remain low / stop prices rising (1) less demand-pull inflation (1). 2(c) Analyse how economic growth conflicts with balance of 6 payments stability. Coherent analysis which might include: Economic growth may benefit from higher spending (1) whereas balance of payments stability does not (1). Less balance of payment stability because economic growth leads to higher income (1) higher employment (1) increases spending/consumption (1) increase the demand for goods and services (1) including imported goods (1) reducing net exports (1) increase trade deficit / reduce trade surplus (1). Economic growth could increase demand for imported raw materials (1) imported capital goods (1). Economic growth could lead to demand-pull inflation (1) wage rises (1) increase price of exports (1) reduce competitiveness of exports (1). 2(d) Discuss whether or not having a lower GDP will be a 8 Accept discussion of low GDP. disadvantage to an economy. Level Description Marks In assessing each answer, use the table opposite. 3 A reasoned discussion which 6–8 Why it might be a disadvantage: accurately examines both sides of • lower income and lower purchasing power, lower the economic argument, making standards of living use of economic information and • lower investment as less demand for goods and services, clear and logical analysis to less production evaluate economic issues and • lower healthcare and education standards situations. One side of the • lower levels of employment argument may have more depth • may be lower exports than the other, but overall both • lower tax revenue sides of the argument are • may result in deflation considered and developed. There is thoughtful evaluation of Why it might be an advantage: economic concepts, terminology, • less production leads to less environmental problems information and/or data appropriate • less work could lead to less stress to the question. The discussion • less income leads to less imports, better current account may also point out the possible balance uncertainties of alternative • less income leads to less inflation decisions and outcomes. • GDP per head could rise if population fallen more than GDP 2 A reasoned discussion which 3–5 makes use of economic information and clear analysis to evaluate economic issues and situations. The answer may lack some depth and development may be one- sided. There is relevant use of economic concepts, terminology, information and data appropriate to the question. 2(d) Level Description Marks 1 There is a simple attempt at using 1–2 economic definitions and terminology. Some reference may be made to economic theory, with occasional understanding. 0 A mark of zero should be awarded 0 for no creditable content.

Mark scheme

3(a) Define structural unemployment. 2 Workers without jobs (1) Unemployment due to a change in the structure of the economy / change in demand and supply conditions / decline of some industries (2) lack of the appropriate skills (1) lack of labour mobility (1). 3(b) Explain two causes of low productivity. 4 One mark for each cause identified and one mark for each explanation. Logical explanation which might include: Poor education and training (1) leading to lack of skills / Lack of specialisation is too vague. qualifications (1). Poor technology (1) slower or less output per capital / labour input (1). Poor management (1) waste of resources (1). Lack of investment (1) capital older/slower/out-of-date (1). Emigration of skilled workers (1) output of unskilled workers who are left is lower (1). Poor working conditions (1) making it difficult for workers to do their jobs efficiently (1). Low pay (1) which may demotivate workers (1). Long working hours (1) making workers tired (1). 3(c) Analyse how higher government spending and tax cuts can 6 Maximum of 4 marks for only higher spending OR lead to a fall in cyclical unemployment. tax cuts Coherent analysis which might include: Higher spending on e.g. unemployment benefits / education / infrastructure / healthcare (1) could lead to higher demand for goods and services (1) increased demand for goods and services leads to higher revenues/profits for firms (1) increased investments (1) increasing output (1) increased demand for workers to produce the output (1). Tax cuts such as income tax cuts (1) increased disposable income (1) increase consumer expenditure (1) increased demand for goods and services (1) higher revenues/profits for firms (1) increased investments (1) increasing output (1). Tax cuts such as corporation tax cuts (1) increased after tax profits (1) increased investments (1) increasing output (1). Tax cuts such as indirect tax cuts (1) decrease cost of production (1) increased supply / output (1). 3(d) Discuss whether or not competition between firms in the same 8 Level Description Marks industry is always a disadvantage to workers. 3 A reasoned discussion which 6–8 In assessing each answer, use the table opposite. accurately examines both sides of the economic argument, making Why it might be a disadvantage use of economic information and • more competition between firms means firms try to be clear and logical analysis to more efficient, which could lead to lower job opportunities / evaluate economic issues and greater instability of employment situations. One side of the • there may be greater use of short-term employment argument may have more depth contracts than the other, but overall both • more competition between firms could push down the sides of the argument are wages of the workers. considered and developed. There • more competition between firms could lead to workers is thoughtful evaluation of being exploited e.g. overtime work, worse working economic concepts, terminology, conditions. information and/or data appropriate to the question. The discussion Why it might be an advantage may also point out the possible • more competition between firms would lead to firms uncertainties of alternative training workers to be more productive decisions and outcomes. • increased productivity leads to higher wages • increased productivity could lead to more investments – 2 A reasoned discussion which 3–5 leading to more demand for workers makes use of economic information • more competition between firms could lead to lower prices, and clear analysis to evaluate which benefits workers who are also consumers economic issues and situations. • lower prices could lead to more demand, which increases The answer may lack some depth the demand for workers as well and development may be one- • greater efficiency could result in higher revenue some of sided. There is relevant use of which may be spent improving working conditions economic concepts, terminology, • more competition between firms could lead to them raising information and data appropriate to wages and / or improving working conditions to attract the the question. best workers • more competition between firms gives more opportunities for workers to switch jobs. 3(d) Level Description Marks 1 There is a simple attempt at using 1–2 economic definitions and terminology. Some reference may be made to economic theory, with occasional understanding. 0 A mark of zero should be awarded 0 for no creditable content.

Mark scheme

4(a) Define investment. 2 Investment is spending (1) on capital goods (1) to increase output (1). 4(b) Explain two causes of a shift of a product’s demand curve to 4 One mark for each cause identified and one mark the left. for each explanation. Logical explanation which might include: No mark for stating demand falls because of a rise Decrease in price / rise in quality of substitutes (1) increased in price. demand for substitutes (1). No diagram is required. No marks for a diagram. Increase in price of complements (1) decrease demand for complements (1). Decrease in income (1) decrease in purchasing power (1). Changing trends / tastes (1) decrease popularity (1). Changing seasons (1) changing demand (1). Decrease in population size (1) fewer people to buy the product (1). Rise in the rate of interest (1) less able to borrow to buy the product (1). 4(c) Analyse, using a production possibility curve diagram (PPC), 6 the effect of increased investment in both education and the health sector. Up to 4 marks for the diagram: Axes correctly labelled with different goods or services (1). Initial curve drawn as a curve / line sloping downward to the axes (1). New curve drawn to the right as a curve / line sloping downward to the axes (1). Accept education on one axis and health on the Shift indicated by arrow or letters (1). other. Up to 2 marks for written comments: Accept any other two relevant categories e.g. Increased investments in education and healthcare leads to better manufactured and agricultural goods. health/qualification / higher quality resources (1) better technology (1) increased productivity (1) better quality Accept a pivot out if education and health is on one workforce/skills/qualification (1) may be more resources (1) axis and other goods on the other. increase productive capacity / the maximum quantity of products that can be produced within a certain time period / create economic growth (1). 4(d) Discuss whether consumers would benefit more from 8 Level Description Marks healthcare being provided by the private sector or the public sector. 3 A reasoned discussion which 6–8 accurately examines both sides of In assessing each answer, use the table opposite. the economic argument, making use of economic information and Why private sector is better: clear and logical analysis to • profit maximising objective will lead to higher efficiency. evaluate economic issues and • lower costs. situations. One side of the • more choice argument may have more depth • private firms will try to compete than the other, but overall both • could lead to higher quality sides of the argument are • private sector more likely to be able to raise funds considered and developed. There • private sector investment will lead to less opportunity cost is thoughtful evaluation of for public sector – leading to more spending on other economic concepts, terminology, industries e.g. education / government do not have to raise information and/or data appropriate taxes to fund healthcare services to the question. The discussion may also point out the possible Why public sector is better: uncertainties of alternative • private sector investment leads to market failure such as decisions and outcomes. merit goods • public sector cares more about the wellbeing of the people 2 A reasoned discussion which 3–5 • could lead to higher quality provisions makes use of economic information • public sector may produce on a larger scale and take and clear analysis to evaluate advantage of economies of scale economic issues and situations. • public sector may not charge for services whereas private The answer may lack some depth sector will or public sector may charge a lower price. and development may be one- sided. There is relevant use of economic concepts, terminology, information and data appropriate to the question. 4(d) Level Description Marks 1 There is a simple attempt at using 1–2 economic definitions and terminology. Some reference may be made to economic theory, with occasional understanding. 0 A mark of zero should be awarded 0 for no creditable content.

Mark scheme

5(a) Define economic development. 2 Increase in GDP is not sufficient. When there is an increase in standards of living of the people of a country / quality of life / economic welfare (2). Increase in income per head / average income/GDP per head / education / healthcare / HDI (1). The process by which low-income economies become high-income economies (1). Movement from primary towards the secondary and tertiary sectors (1). 5(b) Explain two reasons why children in rural areas may receive 4 One mark for each cause identified and one mark less education than those in cities. for each explanation. Logical explanation which might include: Low income (1) cannot afford to go to school (1). Poor infrastructure (1) cannot get to school / no schools (1). Have to work on the family farm (1) no time to go to school (1). Parental attitude (1) they do not see benefit of education (1). Low tax revenue in rural areas (1) government spending on schools lower (1). Difficult to recruit teachers (1) poor housing / long distance to travel / low wages (1) Lack of schools (1) difficult to get materials to build schools / may be insufficient children (1). Parents have not been educated (1) don’t see the value in (paying for) education (1) 5(c) Analyse the advantages of selling a product which is price- 6 Award up to 2 marks for a diagram that shows price inelastic in demand. rising and total revenue rising, but do not reward twice. Coherent analysis which might include: Price-inelastic demand means when price increases, quantity demanded falls by a less than proportionate amount or vice versa (1). Relevant example (1). When demand is price-inelastic, price and revenue move in the same direction (1). PED of less than one (1) may indicate lack of competition / substitutes (1) necessities often have inelastic demand (1) Firms can increase prices (1) total revenue increases (1) may increase in profits (1) if revenue rises faster than cost (1). Less market volatility (1) stability of income/revenue (1) making it easier to plan (1). 5(d) Discuss whether or not an increase in the level of savings is 8 Level Description Marks beneficial for an economy. 3 A reasoned discussion which 6–8 In assessing each answer, use the table opposite. accurately examines both sides of the economic argument, making Why an increase in the level of savings may be beneficial: use of economic information and • increase in savings could provide more funds for firms to clear and logical analysis to borrow to invest evaluate economic issues and • could lead to more future expenditure for consumers on situations. One side of the things such as education argument may have more depth • increase in firms’ productivity due to higher investments than the other, but overall both • increase in future standards of living / income for sides of the argument are consumers considered and developed. There • savings for old age / rainy day for consumers is thoughtful evaluation of • may reduce the need to borrow and so reduce the risk of economic concepts, terminology, debt information and/or data appropriate • may reduce inflation to the question. The discussion • may reduce spending on imports and so improve the may also point out the possible current account of the balance of payments uncertainties of alternative decisions and outcomes. Why increase in the level of savings may not be beneficial: • increase in savings will lead to lower spending by 2 A reasoned discussion which 3–5 consumers, lower total demand and lower economic makes use of economic information growth now and clear analysis to evaluate • lower expenditure on goods and services by consumers economic issues and situations. which leads to less profits for firms and less government The answer may lack some depth tax revenue and development may be one- • increase in savings may reduce the incentive for firms to sided. There is relevant use of invest economic concepts, terminology, • increase in savings may be a sign of lower confidence in information and data appropriate to the economy the question. • may reduce total demand an increase unemployment 5(d) Level Description Marks 1 There is a simple attempt at using 1–2 economic definitions and terminology. Some reference may be made to economic theory, with occasional understanding. 0 A mark of zero should be awarded 0 for no creditable content.