CJC 2022 A-level CSQ2 ANS

2022 A Level H1 CSQ2 SAMS 2022 A Level H1 CSQ Q2 Suggested Answers (a) With reference to Table 2, what can be concluded about projected government spending relative to government revenue in Botswana and Zimbabwe? [2] Table 2 shows that both Botswana’s and Zimbabwe’s balance budget as a percentage of GDP are negative, reflecting budget deficit in both countries. [1] Hence both countries’ projected government spending is larger than government (tax) revenue. [1]

2022 A Level H1 CSQ2 SAMS (b) Explain the relationship you would expect between the adult literacy rate and real GDP per capita and comment on the extent to which Figure 3 supports the expected relationship. 4m - Explain 2m – Comment [6] the adult literacy rate ➔ real GDP per capita Adult literacy rate and real GDP per capita are expected to have a positive relationship. [1] Higher adult literacy rate suggests a higher level of education implying highly trained and skilled labour force in the economy. [1] Workers with high education level are more opened to technological changes and easier to be trained. This increases labour productivity and hence increases the economy’s productive capacity [1]. This increases the economy’s LRAS and hence increases the country’s real national output. The higher real GDP contributes to a higher real GDP per capita, assuming population remain largely unchanged. [1] Figure 3 supports the expected positive relationship between the adult literacy rate and real GDP per capita to a large extent. Botswana and Namibia with higher literacy rates and higher real GDP per capita whereas Mali’s low adult literacy rate reflects its low real GDP per capita. [1] Zimbabwe, however, does not appear to support this relationship, as its real GDP per capita is low despite its high literacy rate compared to other countries in the figure. [1] There could be other factors contributing to the low GDP per capita for Zimbabwe.

2022 A Level H1 CSQ2 SAMS (c ) The global price of diamonds changed significantly between December 2019 and March 2020. Using an aggregate demand and aggregate supply diagram, explain the impact this change might be expected to have on real GDP in Botswana. [6] Extract 5: It is stated in extract 5 that diamonds have a PED value of between 0 to 1 - which means that demand for diamonds is considered to be price inelastic. The global price for diamonds generally decreased between Dec 2019 and Mar 2020. [1] Given that demand for diamonds is price inelastic - a decrease in price will result in a less than proportionate increase in quantity demanded → total revenue (P x Q) from sale of diamonds will thus decrease. [1] Given that diamonds contribute 80% to export earnings, (X-M) will decrease [1] → AD will decrease → A fall in AD will result in a fall in Real National Income from Y1 to Y2. This will then lead to a fall in income induced consumption and thereafter, a further fall in AD. This triggers many successive rounds of decrease in national income and income induced consumption. At each round, the decrease in both gets smaller. The multiplier process will end when the decrease in national income is too small to generate further decreases in induced consumption. The autonomous fall in AD from AD1 to AD2 results in a multiplied decrease in real GDP from Y1 to Y5 in Botswana for this period. Diagram [1]

2022 A Level H1 CSQ2 SAMS

2022 A Level H1 CSQ2 SAMS (d) With reference to the extracts, explain which information would be most useful when considering the standard of living of Botswana and comment on the reliability of this information. Note: This question will be 6m in the new syllabus, 4m - Explain 2m – Comment [7] Standard of Living (SOL) reflects the well-being of an average person in a country. It includes material and non -material well -being. Material well -being refers to the quantity of goods and services available to the average person in a country. Non-material well-being examines the quality of life of an average person in a country. [1] Explain at least 2 indicators and how they are useful [3] 1. GDP growth [Extract 5 - Botswana had enjoyed strong stable growth till 2019]: Implies that growth rates and therefore average income levels are increasing at a slower rate resulting in a slower growth in material SOL. OR 2. Gini Coefficient [Extract 5 – Inequality measured by Gini coefficient] : Provides an understanding on levels of income inequality in the country → Extract 4 mentions that the Gini coefficient has been falling which reflects that income is therefore more equally distributed, affecting that majority of the people are enjoying higher purchasing power and therefore material SOL OR 3. Upper-Middle Income Country [Extract 5] - Indicates that average incomes are above the world average and as such an average person in the country enjoy higher material standard of living than the average person in the world 4. Human development index [Extract 5 – strengthening the country’s HDI rating]: An composite index which aggregates information in three areas - GNI per capita (PPP international dollars): This would be most useful as it allows us to make an assessment of both material & non-material SOL - Life expectancy can give us an insight on non-material SOL since life expectancy is positively correlated with access, quality of healthcare as well as diet & sanitary conditions. - Mean expected years of schooling: This can give us an idea on education attainment which contributes both to material & non -material SOL as education can help individuals attain better paying jobs and thus increase in purchasing power & improves non-material SOL due to better satisfaction This indicator is useful as it reflects overall SOL – both Material and non-material SOL Reliability of this information [2] • Economic growth may not be a good indicator as it looks at the growth in real income without taking into account changes in population and how the income is distributed among the people. • While Gini coefficient has decreased, data also indicates that it still remains high. This implies that income is still unequally distributed among the people, over -estimating any improvement in material SOL in the country. Moreover, Gini coefficient cannot be used as a standalone indicator for SOL. It has to be used with rea income per capita. • Being an upper-middle income country does not indicate how incomes are distributed in the country. If incomes are unequally distributed in the country as reflected by the high Gini coefficient mentioned, then income is still unequally distributed among the people, over - estimating any improvement in material SOL in the country • Non-material SOL has many other dimensions which is not capture in HDI. E.g. pollution index, stress levels, safety and security

2022 A Level H1 CSQ2 SAMS e(i) Explain how the management of the Singapore dollar could counteract the inflationary pressure predicted in Extract 4. [4] Inflationary pressures predicted in Extract 4 predicts both demand-pull inflation as “govts offer too much support to businesses and households to keep spending” and cost -push inflation due to “damage to global supply chains caused by the COVID-19 outbreak” Appreciation of the Singapore dollar: i) Counter DD-pull inflation [2] • Px in terms of foreign currency becomes relatively more expensive (constant in terms of local SGD) >> DDx decreases >> X falls • Pm in terms of local currency falls >> quantity demanded for imports rises >> M rises • (X-M) falls → AD falls, c.p. → surplus of goods at original GPL → downward pressure on prices → GPL falls → counteract the DD-pull inflationary pressures ii) Counter cost-push inflation [2] • Pm in terms of local currency falls > imported factor inputs become relatively cheaper >> unit cost of product