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383 views4 pages

Zimbabwe Ms

Uploaded by

alyasin.ics
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Inflation, exchange rates,

development and externalities


(HL and SL)
IB Examination style paper 2

Barriers to economic development in Zimbabwe


Markscheme answers
a. (i) Define the term in commodity. [Paragraph 1] [2]

A commodity is a good produced from mining, agriculture, forestry, or fishing.

(ii) Using an aggregate demand and supply diagram, explain how rising world commodity prices
might lead to inflation in Zimbabwe. [Paragraph 1] [4]

A rise in commodity prices in Zimbabwe


leads to a rise in business costs and this will
cause the short-run aggregate supply curve
to shift to the left in the diagram this leads
to a rise in the average price level and cost-
push inflation in Zimbabwe.

b. Using an exchange rate diagram, explain how Zimbabwe’s contractionary monetary policy
might affect the value of the Zimbabwe dollar. [Paragraph 2] [4]

Contractionary monetary policy used by the


Zimbabwean central bank means increasing
interest rates. This would attract portfolio
investment and speculative funds into
Zimbabwe which increases the demand for
the Zimbabwean dollar and leads to an
appreciation in its value.

© Alex Smith
InThinking www.thinkib.net/Economics
c. Explain how economic growth in Zimbabwe might lead to a rise in tax revenue and a fall in
government expenditure. [Paragraph 3] [4]

Economic growth might lead to:

• A rise in tax revenue in Zimbabwe because higher household incomes lead to more income
tax paid, greater business profits lead to more corporation (profit) being tax collected and
increased household spending leads to more indirect tax revenue.

• A fall in government expenditure as fewer transfer payments have to be paid to


Zimbabwean households in the form of unemployment and other benefits.

d. Calculate the number of unemployed in Zimbabwe. [Table 1] [3]

• number unemployed / 7,204,228 x 100 = 5.7%

• 0.057 x 7,204,228 = 410,641

e. Using a cost/benefit diagram, explain the negative externalities of tobacco farming in


Zimbabwe. [Paragraph 7] [4]

When the Tobacco farmers in Zimbabwe


burn the fields to ‘cure’ them there is a
negative externality because the smoke
from the fields adversely affects the
welfare of residents who live near them.
This is shown in the cost-benefit diagram
where the marginal social costs of
production are above the marginal
private costs and there is an over-
allocation of resources.

f. Using a Lorenz curve diagram, explain how Zimbabwe’s Gini coefficient is calculated. [Table 2]
[4]

Zimbabwe’s Gini coefficient is calculated


by dividing area A by area A+B in the
diagram to calculate how much of the
area below the line of perfect equality is
accounted for by area A. The greater
area A is the higher the Gini coefficient
and the more unequal Zimbabwe’s
income distribution is.

© Alex Smith
InThinking www.thinkib.net/Economics
g. Using the text provided and your knowledge of Economics, evaluate the importance of the
different barriers to economic development in Zimbabwe. [15]

• Economic development is the increase in the welfare of Zimbabwe’s citizens over time. A
barrier to economic development is any impediment that limits economic development in
Zimbabwe.
• High inflation in Zimbabwe could be a barrier to economic development (‘Inflation in
Zimbabwe has reached a six-month high at 66.1’) because it reduces the real incomes of
households and makes the business environment riskier which reduces the rate of
investment. Both these factors have a negative effect on economic
development. (Evaluation) However, last year’s economic growth is strong at 6.5% which is
a rise in real GDP which could support economic development despite inflation.
• The informal economy can act as a barrier to economic development because it does not
allow the Zimbabwean government the opportunity to raise the tax revenue needed for
health, education, and infrastructure which is important for economic development. The
informal sector is also difficult to control and can be subject to illegal activity (it is difficult to
regulate the goods and services traded in the sector and there is a loss in tax
revenue). (Evaluation) The informal sector does produce goods and services that
households earn income from and it creates employment.
• Environmental factors can be a barrier to economic development if economic growth leads
to negative externalities that reduce the welfare in Zimbabwe. An example of this is
deforestation where tobacco farmers ‘cure’ their crops by burning the ground which leads to
pollution that adversely affects communities (Deforestation along with the curing process
has adverse effects on local communities who live near tobacco
farms). (Evaluation) Effective environmental regulation by the government could reduce the
impact of negative externalities on welfare and development.
• Inequality can be a barrier to economic development in Zimbabwe if certain groups in the
country do not see an improvement in their welfare over time. This might apply to
households with the lowest incomes or gender inequality. (Evaluation) Zimbabwe’s Gini
coefficient (44.3 - 39 out of 165) suggests it is performing reasonably well on this measure. It
is also taking action to promote gender equality through (developing an institutional
framework that promotes gender equality and the empowerment of women).
• *A conclusion might include a discussion of which factor is the most significant barrier to
development.

Marking Criteria for the 15 mark final question Mark


There is no answer to the question but some limited: 1-3
• Application of economic theory
• Evaluation
• Use of information from the case example to support the answer
There is a vague answer to the question with limited: 4-6
• Application of economic theory
• Evaluation
• Use of information from the case example to support the answer
There is an answer to the question with satisfactory: 7-9
• Application of economic theory
• Evaluation
• Use of information from the case example to support the answer

© Alex Smith
InThinking www.thinkib.net/Economics
There is a clear answer to the question with good: 10-12
• Application of economic theory
• Evaluation
• Use of information from the case example to support the answer
There is a clear answer to the question with excellent: 13-15
• Application of economic theory
• Evaluation
• Use of information from the case example to support the answer

Total [40]

© Alex Smith
InThinking www.thinkib.net/Economics

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