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Economic Paper 2 (2020-2024)

This document is an examination paper for Cambridge IGCSE Economics, specifically Paper 2 Structured Questions for the February/March 2020 session. It includes instructions for answering questions, source material related to air pollution in India, and various structured questions covering economic concepts and analysis. The paper consists of two sections, with Section A focusing on a specific case study and Section B allowing for broader discussion on different economic topics.

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0% found this document useful (0 votes)

3K views256 pages

Economic Paper 2 (2020-2024)

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Cambridge IGCSE™

ECONOMICS 0455/22
Paper 2 Structured Questions February/March 2020

2 hours 15 minutes

You must answer on the enclosed answer booklet.

* 9 8 0 8 0 0 9 6 7 5 *

You will need: Answer booklet (enclosed)

INSTRUCTIONS
● Answer four questions in total:
Section A: answer Question 1.
Section B: answer three questions.
● Follow the instructions on the front cover of the answer booklet. If you need additional answer paper,
ask the invigilator for a continuation booklet.
● You may use a calculator.

INFORMATION
● The total mark for this paper is 90.
● The number of marks for each question or part question is shown in brackets [ ].

This document has 8 pages. Blank pages are indicated.

DC (JC) 184588/2
© UCLES 2020 [Turn over
2

Section A

Read the source material carefully before answering Question 1.

Source material: Air pollution in India

India fact file 2016 2017

Real GDP $8750.0 billion $9362.5 billion
Current account deficit as % of GDP –0.7 –1.2
Car production 3.7 million 4.0 million

As India increases its output, it creates more pollution. Its government encourages economic growth
by promoting investment and free trade. It is considering cutting taxes, spending more on education,
lowering import tariffs and removing some import quotas.

The Indian government intervenes in its economy for a number of reasons, including to reduce
pollution. The causes of pollution include vehicles and private and public sector factories which emit
harmful gases. With reductions in the cost of producing cars and rising incomes, more cars are being
produced and purchased in India.

Producers and car drivers base their decisions on just their private costs and benefits. Some farmers
burn their fields after harvesting to increase the growth of their next crop, even though their action
causes pollution. Also, some owners of mines do not take sufficient care to ensure that minerals and
metals do not leak into local water supplies.

As well as affecting pollution, the relative size of the primary sector can influence average income as
shown in Table 1.

Table 1 Primary sector output as a percentage of GDP

and GDP per head in selected countries in 2017

Primary sector output GDP per head

Country
(% of GDP) ($)
US 1 59 600
Spain 3 38 200
Argentina 8 20 700
Egypt 11 13 000
India 18 7 200
Philippines 30 8 200

To reduce pollution, the Indian government subsidises bus travel. It also requires buses to run on
natural gas rather than on more polluting diesel and petrol. Reduced pollution can attract more foreign
tourists. Foreign tourism and changes in the foreign exchange rate affect the current account of a
country’s balance of payments. It has been predicted that India’s foreign exchange rate is likely to rise
in the future.

© UCLES 2020 0455/22/F/M/20

Answer all parts to Question 1. Refer to the source material in your answers.

1 (a) Calculate India’s economic growth rate in 2017. [1]

(b) Identify two methods of protection. [2]

(c) State why India is a mixed economy. [2]

(d) Explain why external costs cause market failure. [4]

(e) Draw a demand and supply diagram to show the effects of a decrease in the costs of
production on the market for cars. [4]

(f) Analyse the relationship between the size of countries’ primary sector output and GDP per
head. [5]

(g) Discuss whether or not increasing subsidies given to bus travel would reduce pollution in
India. [6]

(h) Discuss whether or not India is likely to experience a deficit on the current account of its
balance of payments in the future. [6]

© UCLES 2020 0455/22/F/M/20 [Turn over

Section B

Answer any three questions.

Each question is introduced by stimulus material. In your answer you may refer to this material and / or
to other examples that you have studied.

2 The main industries in the Seychelles, an island country in the Indian ocean, are tourism and
fishing. The price elasticity of supply of fish is affected by the relatively short time that fish can be
stored. Economic goods and free goods play a role in both fishing and tourism. With rises in the
skills of workers and an increase in enterprise, GDP per head has increased by more than seven
times over the last fifty years.

(a) State the formula for calculating the price elasticity of supply (PES). [2]

(b) Explain how opportunity cost is different for economic goods and free goods. [4]

(c) Analyse, using a production possibility curve (PPC) diagram, the effect of an increase in
enterprise on an economy. [6]

(d) Discuss whether or not skilled workers are always paid more than unskilled workers. [8]

3 In 2017, the Brazilian paper industry was booming. Its total revenue increased and it employed
both more, and better quality, factors of production. Brazil’s largest paper producer merged with an
Indonesian paper-producing firm at the end of 2017. The performance of Brazil’s coffee industry
differed from its paper industry. Brazilian coffee experienced a fall in demand and a fall in total
revenue.

(a) Define total revenue. [2]

(b) Explain two differences between capital and labour. [4]

(d) Discuss whether or not demand for coffee is likely to rise in the future. [8]

4 African countries are expected to experience growth in their output. It is also predicted that Africa’s
population will increase from 1.1 bn in 2017 to 4.2 bn by 2100, when Nigeria will account for one
in twelve of the world’s births. Nigeria and South Africa are expected to experience the greatest
rise in investment (spending on capital goods) over this period, and a change in their gender
distribution.

(a) Define gender distribution. [2]

(b) Explain two benefits of a higher economic growth rate. [4]

(c) Analyse the disadvantages of a rapidly growing population. [6]

(d) Discuss whether or not a cut in the rate of interest will increase investment. [8]

© UCLES 2020 0455/22/F/M/20

5 The Chinese government reformed the Chinese tax system in 2016. It extended VAT (sales tax)
from the sale of goods to the sale of services enabling it to cut the corporation tax rate. Taxes
on goods and services are usually regressive. The Chinese government wanted to raise living
standards and hoped that a cut in the tax rate firms pay would attract multinational companies
(MNCs) to the country.

(a) State two reasons for levying taxes. [2]

(b) Explain the difference between a progressive tax and a regressive tax. [4]

(c) Analyse how a cut in the rates of corporation tax and income tax may influence the number of
MNCs setting up in the country. [6]

(d) Discuss whether or not people in a high-income country always enjoy a higher living standard
than those in a low-income country. [8]

© UCLES 2020 0455/22/F/M/20

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© UCLES 2020 0455/22/F/M/20

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Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of the University of
Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge.

© UCLES 2020 0455/22/F/M/20

Cambridge IGCSE™

ECONOMICS 0455/21
Paper 2 Structured Questions May/June 2020

2 hours 15 minutes

You must answer on the enclosed answer booklet.

* 7 7 2 2 5 2 8 6 7 8 *

You will need: Answer booklet (enclosed)

INFORMATION
● The total mark for this paper is 90.
● The number of marks for each question or part question is shown in brackets [ ].

This document has 8 pages. Blank pages are indicated.

DC (JC) 184589/2
© UCLES 2020 [Turn over
2

Section A

Read the source material carefully before answering Question 1.

Source material: Vietnam’s growing population and economy

Vietnam fact file 2010 2017

GDP $272.8 billion $662.4 billion
Population 88 million 96 million
Foreign exchange rate $1 = 19 500 dong $1 = 22 780 dong

Vietnam’s population and its output are increasing. Consumers, workers and firms are benefiting from
the higher output. Some Vietnamese people are receiving more generous pensions and higher wages
while some firms are earning higher profits.

Vietnam’s population is ageing but the country still has a relatively young labour force. Age can affect
workers’ flexibility, mobility, level of experience and their knowledge of the latest technology. The
Vietnamese government wants to raise the quality of its labour force by spending more on education.
Vietnamese children have recently performed better in international tests than children in richer
countries. Education spending can influence the percentage of the labour force working in the tertiary
sector as shown in Table 1.

Table 1 Education spending as a percentage of GDP and the percentage of the labour force
employed in the tertiary sector in selected countries in 2017.

Country Education spending Labour force employed in

% of GDP the tertiary sector
(%)
Norway 7.4 78.0
Vietnam 6.3 32.3
France 5.5 75.9
Germany 4.9 71.2
Indonesia 3.6 45.2
Iran 3.1 49.1
Bangladesh 2.0 35.6

Vietnam has had a budget deficit since 2008. The country’s high economic growth rate and changes in
government policies will affect its budget balance in the future. The government is privatising a number
of public sector firms. It also plans to spend more on education and defence and is likely to raise some
tax rates.

Deregulation has increased the number of firms, both foreign and domestically owned, in a number
of markets. For instance, in 2007 there was only one Vietnamese airline. It operated only two routes
and the fares it charged were not affordable to most Vietnamese. Now the country has seven airlines
offering domestic and international flights.

Borrowing by both households and firms increased in Vietnam between 2010 and 2017. Households
borrowed mainly to purchase more consumer goods while firms borrowed mainly to invest.

© UCLES 2020 0455/21/M/J/20

Answer all parts to Question 1. Refer to the source material in your answers.

1 (a) Calculate Vietnam’s GDP per head in 2017. [1]

(b) Identify two rewards to factors of production. [2]

(d) Explain two benefits an economy may gain from having a young labour force. [4]

(e) Analyse why Vietnam’s budget deficit may decline in the future. [4]

(f) Analyse the relationship between government spending on education and the percentage of
the labour force employed in the tertiary sector. [5]

(g) Discuss whether or not an increase in competition is likely to benefit Vietnamese consumers.
[6]

(h) Discuss whether or not the increase in borrowing is likely to have caused inflation in Vietnam
in 2017. [6]

© UCLES 2020 0455/21/M/J/20 [Turn over

Section B

Answer any three questions.

Each question is introduced by stimulus material. In your answer you may refer to this material and / or
to other examples that you have studied.

2 Japan has a low immigration rate and a declining population. In recent years, it has experienced
deflation and a rise in child poverty. By 2017, one in six Japanese children lived in a household
with less than half of the average household income. Japan operates a national minimum wage
which increased every year between 2010 and 2017. This may have affected the level of poverty
in the country.

(a) State two benefits a country may gain from immigration. [2]

(b) Explain two consequences of deflation. [4]

(d) Discuss whether or not a national minimum wage will reduce poverty. [8]

3 There is a smaller proportion of large firms in Africa than in Asia. The two African countries with
the largest firms are Nigeria and South Africa. These two countries’ firms have more capital
goods than most other African countries’ firms. Firms in South Africa produce a range of products
including gold and petrochemicals. In recent years, a number of African firms have developed into
multinational companies (MNCs), producing mainly in other African countries.

(a) Define a capital good. [2]

(b) Explain two challenges facing small firms. [4]

(d) Discuss whether or not MNCs increase production and productivity in their host countries. [8]

4 Economists are uncertain about the future United States (US) macroeconomic performance. For
instance, in recent years, US unemployment has fallen while the deficit on the current account of
the balance of payments has fluctuated. Whether its current account deficit will rise or fall in the
future may be affected by proposed tax cuts. Some economists suggest that the US government
should not be concerned about the country’s current account deficit.

(a) Define macroeconomics. [2]

(b) Explain two consequences to firms of unemployment. [4]

(c) Analyse how tax cuts could increase exports. [6]

(d) Discuss whether or not a current account deficit on its balance of payments harms an
economy. [8]

© UCLES 2020 0455/21/M/J/20

5 Australian firms have been praised for introducing new technology. The actions of some of these
firms, however, cause market failure. The Australian government uses subsidies, among other
policies, to reduce market failure. Government spending is used both to improve the performance
of individual markets and the macroeconomy. The Australian government increased its spending
in 2017, in part to reduce unemployment.

(a) State two objectives of firms. [2]

(b) Explain how a subsidy can correct market failure. [4]

(d) Discuss whether or not an increase in government spending will reduce unemployment. [8]

© UCLES 2020 0455/21/M/J/20

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© UCLES 2020 0455/21/M/J/20

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© UCLES 2020 0455/21/M/J/20

Cambridge IGCSE™

ECONOMICS 0455/22
Paper 2 Structured Questions May/June 2020

2 hours 15 minutes

You must answer on the enclosed answer booklet.

* 7 3 1 1 5 8 5 9 8 1 *

You will need: Answer booklet (enclosed)

INFORMATION
● The total mark for this paper is 90.
● The number of marks for each question or part question is shown in brackets [ ].

This document has 8 pages. Blank pages are indicated.

DC (JC) 184590/2
© UCLES 2020 [Turn over
2

Section A

Read the source material carefully before answering Question 1.

Source material: the challenges facing Pakistan

Pakistan fact file 2016 2017

$ billion $ billion
Exports of goods 20.5 25.2
Imports of goods 47.0 61.7
Government spending 40.5 43.2
Consumer spending 259.3 294.8

Pakistan faces a number of economic challenges. These include responding to a rising population,
improving its trade in goods balance, controlling the country’s inflation rate and increasing the country’s
economic growth rate. To overcome these challenges, the Pakistani government is trying to increase
investment. Currently, a high proportion of the country’s resources are used to produce consumer
goods.

The government is subsidising entrepreneurs and charities to open low-cost schools. It wants to reduce
the dropout rate from schools and to raise educational standards. Some parents do not recognise the
advantages that a merit good such as education can give their children, for example better health and
better job opportunities. Some of the poor need their children to work from a young age to support the
family. Government reforms have not yet led to a significant rise in teachers’ wages but have improved
school buildings and the number of children attending. The qualifications required to teach may be
increased in the future.

Improved education may affect the number of skilled workers who emigrate and may raise the quantity
and quality of goods and services produced. Any resulting higher income may influence the value of
imports purchased, as shown in Table 1.

Table 1 GDP per head and imports per head in selected countries in 2017.

Country GDP per head Imports per head

($) ($)
Norway 70 600 14 472
UK 43 600 10 419
South Korea 39 400 11 602
Russia 27 900 4 002
Mexico 19 500 7 343
Pakistan 5 400 1 143
Haiti 1 800 853

Pakistan has relatively high import tariffs. Revenue from import tariffs is 45% of total tax revenue. The
tariffs on vehicles, some of which have inelastic demand, are particularly high. Future Pakistani tariffs
may be influenced by changes in other countries’ trade policies, as well as other factors.

© UCLES 2020 0455/22/M/J/20

Answer all parts to Question 1. Refer to the source material in your answers.

1 (a) Calculate Pakistan’s trade in goods balance in 2017. [1]

(b) Identify two possible causes of demand-pull inflation in Pakistan in 2017. [2]

(d) Explain two reasons why education is a merit good. [4]

(e) Analyse why the children of poor families tend to receive less education than the children of
rich families. [4]

(f) Analyse the relationship between GDP per head and imports per head. [5]

(g) Discuss whether or not the supply of teachers in Pakistan is likely to increase in the future.
[6]

(h) Discuss whether or not an increase in its import tariffs would be likely to benefit the Pakistani
economy. [6]

© UCLES 2020 0455/22/M/J/20 [Turn over

Section B

Answer any three questions.

Each question is introduced by stimulus material. In your answer you may refer to this material and / or
to other examples that you have studied.

2 The Indian government has declared that the country, now a major car producer, will sell only
electric cars by 2030. The government wants to reduce external costs, some of which are caused
by petrol and diesel cars. Demand for electric cars is currently relatively low and price-elastic. The
government, however, thinks that it will not need to subsidise the production of electric cars to
achieve its target.

(a) Define external costs. [2]

(b) Explain two influences on whether demand for a product is price-elastic or price-inelastic. [4]

(c) Analyse, using a demand and supply diagram, how a subsidy given to producers could affect
the market for electric cars. [6]

(d) Discuss whether cars should be produced by the private sector or the public sector. [8]

3 A number of countries are withdrawing high value banknotes. For instance, Singapore plans to
stop issuing its $10 000 note. High value notes were originally intended to act as a convenient store
of value. Central banks are concerned some notes are now being used illegally. The Singapore
Police Force and the Monetary Authority of Singapore (its central bank) were trying to recruit more
workers in 2017. It was expected that the central bank would raise the rate of interest in 2018.

(a) State two functions of money, other than a store of value. [2]

(b) Explain two advantages banknotes have as a form of money. [4]

(c) Analyse the influences on the mobility of workers. [6]

(d) Discuss whether or not a central bank should raise the rate of interest. [8]

4 In 2017, the Japanese government announced improvements to its tax system. The amount of
tax raised is influenced by the size and age distribution of a country’s population. Japan’s birth
and death rates are falling, its population is ageing, and it has low immigration. Overall, Japan’s
population is decreasing.

(a) State two qualities of a good tax. [2]

(b) Explain two causes of a decrease in the death rate. [4]

(c) Analyse, using a production possibility curve (PPC) diagram, the effect of a decrease in
population size on an economy. [6]

(d) Discuss whether or not an ageing population is a benefit to an economy. [8]

© UCLES 2020 0455/22/M/J/20

5 Mali is a low income and low productivity country in Africa. Its government is using fiscal policy
to reduce poverty. The country’s main industries are agriculture and gold mining. In recent years,
however, there have been some changes in its resource allocation. The country is developing its
iron ore industry. Globally, the iron ore industry is one which has experienced a significant number
of mergers in recent years.

(a) State two key questions about how resources are allocated. [2]

(b) Explain two fiscal policy measures that can be used to reduce poverty. [4]

(c) Analyse why a country may have low productivity. [6]

(d) Discuss whether or not mergers benefit an economy. [8]

© UCLES 2020 0455/22/M/J/20

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© UCLES 2020 0455/22/M/J/20

Cambridge IGCSE™

ECONOMICS 0455/23
Paper 2 Structured Questions May/June 2020

2 hours 15 minutes

You must answer on the enclosed answer booklet.

* 5 5 9 5 1 9 6 5 7 2 *

You will need: Answer booklet (enclosed)

INFORMATION
● The total mark for this paper is 90.
● The number of marks for each question or part question is shown in brackets [ ].

This document has 8 pages. Blank pages are indicated.

DC (JC/SG) 184591/3
© UCLES 2020 [Turn over
2

Section A

Read the source material carefully before answering Question 1.

Source material: some problems affecting the Greek economy

Greece fact file 2015

Population 10.8 million
% Population over 60 years old 27%
Unemployment rate 24%
Net migration – 44 905

Greece is the country that was worst affected by the European financial crisis that began in 2008. From
the start of the crisis, no other European economy had such a large percentage fall in GDP. Greece’s
GDP fell by 9% in 2011. One reason for this was a very strong foreign exchange rate.

Since 2014, other European economies have recorded positive economic growth rates. Among the
reasons for this were successful supply-side policy measures and an improving global economy. The
Greek government introduced market-friendly measures, including privatisation and labour market
reforms. These measures brought back some investors and moved the Greek economy closer to a
market economic system. However, Greece’s output still fell. This may be due to the fact that none of
the government policies have managed to change population trends.

The Greek population has been falling since 2010. Greece has the third most rapidly ageing population
in the world, behind Japan and Italy. The economy has not made good use of its older population
because a significant percentage of workers retire earlier than the national retirement age of 67. For
example, 74% of employees in the public sector retire before 61 years old. In addition, the crisis also
led to high levels of emigration.

However, those living on some Greek islands have escaped the effects of the crisis. Income from
tourism has continued to flow into the islands. An island called Ikaria has also managed to gain
international attention as one of the healthiest places in the world. Approximately 30% of the people
who live on this island, live until they are over 90. Health problems are also much less frequent than
those living elsewhere. Overall, however, Greece has managed to improve its Human Development
Index (HDI) value as shown in Fig. 1.

30 000 0.868
25 000 0.866
GDP per head ($)

0.864
20 000
HDI value

0.862
15 000
0.860
10 000
0.858
5000 0.856
0 0.854
2010 2011 2012 2013 2014 2015
Year
GDP per head ($) HDI Value

Fig. 1 Greece’s GDP per head ($) and HDI value from 2010–2015
© UCLES 2020 0455/23/M/J/20
3

Answer all parts of Question 1. Refer to the source material in your answers.

1 (a) Calculate the total number of people over 60 years old in Greece in 2015. [1]

(b) Explain what is meant by an unemployment rate of 24%. [2]

(d) Explain the two supply-side policy measures being used by the Greek government. [4]

(e) Analyse how two of Greece’s population trends may have affected its economy. [4]

(f) Analyse the relationship between Greece’s GDP per head and its HDI value. [5]

(g) Discuss whether or not having a strong foreign exchange rate is a problem for Greece’s
economy. [6]

(h) Discuss whether or not a market economic system improves living standards. [6]

© UCLES 2020 0455/23/M/J/20 [Turn over

Section B

Answer any three questions.

Each question is introduced by stimulus material. In your answer you may refer to this material and/or
to other examples that you have studied.

2 In Nagicho, a small town in Japan, a woman on average has 2.8 children in her lifetime. In Japan
as a whole, a woman on average only has 1.4 children in her lifetime. Nagicho’s higher birth rate
is partly the result of a lower cost of living for families, as the prices of basic items are lower in
Nagicho than in the rest of Japan. The local government not only offers housing at subsidised
rates, to get more labour into the area, but also tries to get more investment into the town.

(a) State two functions of local government. [2]

(b) Explain how a lower cost of living can encourage population growth. [4]

(d) Discuss whether or not increased investment is beneficial to an economy. [8]

3 Ireland has one of the lowest rates of corporation tax in Europe. This has encouraged many
multinational companies (MNCs) to produce in Ireland. Other reasons why firms want to produce
in Ireland include access to freer trade with other European countries, higher labour productivity
and government grants.

(a) State two benefits of free trade. [2]

(b) Explain two reasons why governments levy taxes. [4]

(c) Analyse, using a production possibility curve (PPC) diagram, the impact of higher labour
productivity on an economy. [6]

(d) Discuss whether or not MNCs always benefit their host countries. [8]

4 Business-friendly fiscal policy in the United States (US) has encouraged firms to produce more.
The US government has also encouraged mergers, including firms in the gas and electricity
industries. Even though there are significant regulations, entrepreneurs have found that mergers
enable them to maximise their profits. However, this may make markets less competitive and
some states have imposed a maximum price for gas and electricity.

(a) Define profit maximisation. [2]

(b) Explain two types of mergers. [4]

(d) Discuss whether or not maximum prices are beneficial. [8]

© UCLES 2020 0455/23/M/J/20

5 There is a high level of division of labour in the United Kingdom (UK) energy industry. Cold
weather in early 2018 caused very high demand for energy and a change in its price. This led to a
temporary shortage of energy for firms and households in the UK. Part of the change in price may
have been the result of UK energy firms abusing their monopoly power. This would be an example
of market failure.

(a) Define market failure. [2]

(b) Explain two influences, other than weather, that could affect the demand for a product. [4]

(d) Discuss whether or not workers benefit from division of labour. [8]

© UCLES 2020 0455/23/M/J/20

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© UCLES 2020 0455/23/M/J/20

Cambridge IGCSE™

ECONOMICS 0455/21
Paper 2 Structured Questions October/November 2020

2 hours 15 minutes

You must answer on the enclosed answer booklet.

* 6 5 5 5 8 3 3 8 7 1 *

You will need: Answer booklet (enclosed)

INFORMATION
● The total mark for this paper is 90.
● The number of marks for each question or part question is shown in brackets [ ].

This document has 8 pages. Blank pages are indicated.

DC (KN) 184662/3
© UCLES 2020 [Turn over
2

Section A

Read the source material carefully before answering Question 1.

Source material: Istanbul’s geographical advantage

Istanbul fact file 2014

Population 14 million
Output per head $6858
Total output $96 billion
Istanbul’s output contribution to Turkey’s
30%
total output (%)

Istanbul is Turkey’s largest city by population size. In 2014, its population was approximately 14 times
more than it was in 1955. This could be due to increased migration from rural areas to cities and
improved healthcare. Istanbul also has the highest output per head of all regions in Turkey.

Good transport links have contributed to Istanbul’s economic growth. In addition to good land transport,
Istanbul is also home to the 14th largest airport in the world, measured by passenger numbers. From
Istanbul, there is access to a market of $24 trillion with 1.5 billion people within a flight time of 4 hours.
In addition to affordable international air travel to and from Istanbul, domestic air travel is also very
affordable. This is most likely due to economies of scale. There is also a high level of competition in this
industry which influences prices and quality of service. The growth in transport industries, along with
growth of financial services, has contributed greatly to Istanbul’s growth rate as shown in Table 1.1.

Table 1.1 The percentage growth of Istanbul’s service sector and

the percentage growth of Istanbul’s total output 2010–2014

% growth of % growth of
Year Istanbul’s Istanbul’s
service sector total output
2010 11.9 14.4
2011 28.2 21.9
2012 15.3 16.0
2013 14.2 16.1
2014 13.6 12.7

Foreign investment is flowing into Istanbul. Multinational companies (MNCs) are finding Istanbul an
attractive city to invest in because of the low cost of living. These MNCs are affecting employment, the
level of technology and wages in Istanbul.

However, there is worry that such confidence in the Turkish economy may not last. Many companies
have depended on borrowing for expansion. Increased interest rates around the world may make
it harder for such companies to continue borrowing and also to attract new customers. If there are
greater worries about safety for tourists in Turkey in the future, this may cause fewer people to book
flights to Turkey.

© UCLES 2020 0455/21/O/N/20

Answer all parts of Question 1. Refer to the source material in your answers.

1 (a) Calculate Turkey’s total output. [1]

(b) Identify two factors that affect borrowing in an economy. [2]

(d) Explain two reasons for Istanbul’s increased population. [4]

(e) Analyse how good transport links have contributed to Istanbul’s economic growth. [4]

(f) Draw a demand and supply diagram to show the effects on flights to Turkey of greater worries
about safety for tourists. [4]

(g) Discuss whether or not Istanbul benefits from investment by MNCs. [6]

(h) Discuss whether or not competition is beneficial for airlines. [6]

© UCLES 2020 0455/21/O/N/20 [Turn over

Section B

Answer any three questions.

Each question is introduced by stimulus material. In your answer you may refer to this material and/or
to other examples that you have studied.

2 The election of a new president in South Africa in 2018 led to improvement in business and
consumer confidence. Inflation rates fell despite a rise in total demand. One government policy
measure established areas known as economic zones where firms pay lower, or no, taxes. These
zones encourage domestic firms to become internationally competitive which could reduce the
deficit on the current account of South Africa’s balance of payment.

(a) State two components of the current account. [2]

(b) Explain why inflation may fall even if there is an increase in total demand. [4]

(c) Analyse how a country’s current account deficit might be reduced if its firms become
internationally competitive. [6]

(d) Discuss whether or not lower taxes on firms will be beneficial for an economy. [8]

3 Among the reasons for Malaysia’s continued economic growth are rises in consumer spending
and the country’s ability to adapt to changes in global demand. For example, when the price of
natural rubber fell, most rubber plantations changed to palm oil production. The government has
tried to promote the growth of different sectors, including the primary sector.

(a) State two sectors, other than the primary sector, in an economy. [2]

(b) Explain two possible reasons for a fall in the price of a product such as natural rubber. [4]

(c) Analyse the influences on spending. [6]

(d) Discuss whether or not the growth of the primary sector is beneficial to a country. [8]

4 South east Asian countries have reduced tariffs between themselves through the ASEAN Free
Trade Agreement. ASEAN member countries are also removing non-tariff methods of protection.
The intention is to raise economic growth through more international trade. This should enable
small and medium-sized firms in ASEAN countries to grow and increase their exports.

(a) Define tariffs. [2]

(b) Explain two non-tariff methods of protection. [4]

(c) Analyse, using a production possibility curve (PPC) diagram, the beneficial effects for a
country of the growth of its small and medium-sized firms. [6]

(d) Discuss whether or not increased international trade can promote economic growth. [8]

© UCLES 2020 0455/21/O/N/20

5 Free trade has allowed the Mexican economy to specialise in low-cost manufacturing.
Unemployment nationally is relatively low, but approximately 50 million people were still
considered to be in poverty in 2016. In addition, there are worries that technological advances will
soon replace labour with capital.

(a) State the rewards for labour and capital. [2]

(b) Explain the two types of poverty. [4]

(c) Analyse how firms can benefit from specialisation. [6]

(d) Discuss whether or not supply-side policy measures can reduce unemployment. [8]

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Cambridge IGCSE™

ECONOMICS 0455/22
Paper 2 Structured Questions October/November 2020

2 hours 15 minutes

You must answer on the enclosed answer booklet.

* 6 2 8 5 2 7 8 4 6 2 *

You will need: Answer booklet (enclosed)

INFORMATION
● The total mark for this paper is 90.
● The number of marks for each question or part question is shown in brackets [ ].

This document has 8 pages. Blank pages are indicated.

DC (KN) 184663/2
© UCLES 2020 [Turn over
2

Section A

Read the source material carefully before answering Question 1.

Source material: The destruction of forests in Indonesia

Indonesian fact file 2017 Indonesia 2017 world

palm oil production
36.0 60.0
(million metric tons)
rice production
74.2 483.9
(million metric tons)
unemployment rate
5.4 5.7
(%)
population growth rate
1.2 1.4
(%)

Indonesia is the world’s largest producer of palm oil. The costs involved in producing palm oil include
rent of land, fertiliser, palm oil seeds, maintenance of irrigation systems and casual labour. Fires are set
to clear forests to make way for palm oil plantations. These fires destroy the homes of many species
of wildlife and release harmful gases into the air. Since 2011, Indonesia has been paid to conserve its
forests by the Norwegian government.

While Indonesia is the largest producer of palm oil, it is the third largest producer of rice. Indonesia
exports 85% of its palm oil but sometimes has to import rice to meet domestic demand. Its international
trade in palm oil and rice is influenced by changes in its foreign exchange rate. The price of the
Indonesian currency, the rupiah, fell in 2017.

Rice production also contributes to air pollution. Rice farmers burn the stubble left after harvesting to
clear the fields and to raise the fertility of the land so they can produce more rice. Some environmentalists
argue that stubble burning should be banned.

The Indonesian economy, along with the world economy, continues to grow. Economic growth can
cause pollution. It can also affect a country’s GDP per head ranking and Human Development Index
(HDI) ranking as shown in Table 1.1.

Table 1.1 GDP per head ranking and HDI ranking for selected countries in 2016

country GDP per head ranking HDI ranking

Luxembourg 2 20
Mauritius 64 64
Indonesia 99 113
Cuba 120 68
Ghana 134 134
Ethiopia 167 174

Indonesia experiences net emigration. Some Indonesians work abroad and send money home to their
families. People also come from abroad to work in Indonesia, some in relatively highly paid jobs in the
country’s expanding tourism industry. Indonesia currently attracts fewer tourists than its neighbours,
Singapore and Malaysia. It does, however, have many natural tourist attractions and is currently price
competitive.
© UCLES 2020 0455/22/O/N/20
3

Answer all parts of Question 1. Refer to the source material in your answers.

1 (a) Calculate the percentage of total world output of palm oil produced by Indonesia in 2017. [1]

(b) Identify two variable costs of producing palm oil. [2]

(c) Explain one opportunity cost of conserving forests in Indonesia. [2]

(d) Explain two external costs of the destruction of forests in Indonesia. [4]

(e) Draw a demand and supply diagram to show the effect of a ban on burning stubble on the
market for rice. [4]

(f) Analyse the relationship between countries’ GDP per head ranking and HDI ranking. [5]

(g) Discuss whether or not the immigration of workers would be likely to benefit the Indonesian
economy. [6]

(h) Discuss whether or not the Indonesian tourism industry will increase in the future. [6]

© UCLES 2020 0455/22/O/N/20 [Turn over

Section B

Answer any three questions.

Each question is introduced by stimulus material. In your answer you may refer to this material and/or
to other examples that you have studied.

2 Mexico has a history of trade deficits. The government is moving the economy closer to free trade,
to try to improve its macroeconomic performance. It was predicted in 2017 that Mexico’s economy
would experience a small rise in its unemployment rate. In 2017 the economy’s inflation rate was
6.6%, the highest rate since 2001. A number of policy measures may be used to reduce inflation,
including increasing the rate of income tax.

(a) Define trade in goods balance. [2]

(b) Explain two benefits producers may gain from free trade. [4]

(c) Analyse, using a production possibility curve (PPC) diagram, the effect of an increase in
unemployment on an economy. [6]

(d) Discuss whether or not an increase in the rate of income tax will reduce inflation. [8]

3 The population of Hungary is the most obese in Europe. Hungarians eat fewer vegetables than
most Europeans and more food types that may be considered to be demerit goods. In 2017,
the Hungarian government introduced a tax on unhealthy food, known as the chips tax. The tax
has had some success in moving demand to healthier foods. Some economists suggest that
governments should use price controls as well as taxes to influence the food market.

(a) Define demerit good. [2]

(b) Explain the difference between an extension in demand and an increase in demand. [4]

(d) Discuss whether or not a government should impose a maximum price on food. [8]

4 Italy is home to the world’s oldest bank and some of the world’s oldest car producers. Internationally,
both industries are facing a number of challenges. The wages of bank workers and car workers are
increasing. Demand for bank loans and for cars is changing, in part, due to changes in population
size. It is predicted that the price elasticity of demand (PED) for cars will also change in the future.

(a) State two functions of a commercial bank. [2]

(b) Explain two reasons why emigration from a country may increase. [4]

(d) Discuss whether or not demand for cars will become more price-elastic in the future. [8]

© UCLES 2020 0455/22/O/N/20

5 Wage rate growth has increased recently in Kazakhstan, but its economic growth rate has slowed.
This is, in part, due to a fall in exports. To try to increase the economic growth rate, the government
has increased its spending on investment. In August 2015, it adopted a floating foreign exchange
rate system in an attempt to improve the country’s macroeconomic performance.

(a) Define wages. [2]

(b) Explain two reasons, other than methods of protection, why a country’s exports may fall. [4]

(d) Discuss whether or not a country should switch from a fixed foreign exchange rate system to
a floating foreign exchange rate system. [8]

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Cambridge IGCSE™

ECONOMICS 0455/23
Paper 2 Structured Questions October/November 2020

2 hours 15 minutes

You must answer on the enclosed answer booklet.

* 2 4 9 4 6 8 5 7 6 4 *

You will need: Answer booklet (enclosed)

INFORMATION
● The total mark for this paper is 90.
● The number of marks for each question or part question is shown in brackets [ ].

This document has 8 pages. Blank pages are indicated.

DC (KN) 184664/3
© UCLES 2020 [Turn over
2

Section A

Read the source material carefully before answering Question 1.

Source material: Traffic jams in the Philippines

Philippines fact file 2010 2017

Social cost per kilometre of
0.88 1.22
driving a car in Manila ($)
Private cost per kilometre of
0.45 0.68
driving a car in Manila ($)
Population
72.9 105.8
(millions)
Economic growth rate
7.3 6.9
(%)

Manila, the capital city of the Philippines, is densely populated and has almost no spare land to build
on. It is well-known for its traffic jams (congestion). People can spend hours travelling just a short
distance. The Philippine government is concerned that the traffic congestion may damage people’s
health, discourage multinational companies (MNCs) from setting up in the country and reduce
economic growth. It will also stop the country achieving full employment and reduce labour productivity.
Entrepreneurs and workers are regularly arriving at their firms stressed and tired.

More Philippine workers are moving into Manila to take up jobs in the expanding computer, retail and
education industries. One of the advantages of the Philippine economy is its young and well-educated
population. Increases in the skills of Philippine workers are making it easier for workers to transfer from
declining to expanding industries.

Rises in the country’s population are increasing the number of cars on Philippine roads. Driving is also
encouraged by the low cost and ease of parking, and the poor quality of public transport. Manila has
too few trains but too many buses. By 2017, deregulation had increased the number of bus companies
in the city to more than 1100.

Taxes in the Philippines are relatively high but disposable income has risen. As a result consumer
spending, including on cars, has increased. Some of the cars purchased are imported. Table 1.1 shows
consumer expenditure and imports in selected countries in 2017.

Table 1.1 Consumer expenditure and imports in selected countries in 2017

consumer expenditure imports

country
($bn) ($bn)
Brazil 1322.6 160.6
Argentina 412.3 61.2
Philippines 240.9 93.2
Chile 168.2 60.1
Peru 137.2 40.2
Costa Rica 37.5 15.8
Panama 28.9 9.2

© UCLES 2020 0455/23/O/N/20

The government is considering a number of measures to reduce the traffic congestion in Manila. These
include building more roads, building a rapid bus route where buses travel along bus-only lanes and
increasing car park charges. Building more roads may affect not only journey time but also the number
of cars purchased and driven in the city.

Answer all parts of Question 1. Refer to the source material in your answers.

1 (a) Calculate the external cost per kilometre of driving a car in Manila in 2017. [1]

(b) Identify two macroeconomic aims of the Philippine government. [2]

(d) Explain how an increase in the mobility of Philippine workers would be likely to affect
unemployment in the Philippines. [4]

(e) Draw a demand and supply diagram to show how a rise in the price of car parking could
affect the market for cars in the Philippines. [4]

(f) Analyse the relationship between the countries’ consumer expenditure and imports. [5]

(g) Discuss whether or not the supply of enterprise is likely to increase in the Philippines. [6]

(h) Discuss whether or not building more roads in Manila will benefit the Philippine economy. [6]

© UCLES 2020 0455/23/O/N/20 [Turn over

Section B

Answer any three questions.

Each question is introduced by stimulus material. In your answer you may refer to this material and/or
to other examples that you have studied.

2 Changes in tobacco production and consumption can have both microeconomic and
macroeconomic effects. Tobacco plants are grown in at least 124 countries with different levels
of development. A higher proportion of the poor than of the rich consume tobacco products. The
market for cigarettes, produced using tobacco, is changing. Demand for cigarettes and some
other demerit goods is declining in a number of countries.

(a) Define microeconomics. [2]

(b) Explain two causes of differences in economic development between countries. [4]

(d) Discuss whether or not government intervention will correct the market failure caused by a
demerit good. [8]

3 Russia’s birth rate fell by 11% in 2017 to its lowest level for a decade. Over the next 30 years,
Russia’s population is forecast to fall from 144 million to 107 million. The government announced
measures to reverse this decline in population. In 2017, it also announced privatisation plans and
measures to reverse a decrease in investment which could lead to a fall in the quantity of capital
goods. Privatisation can reduce monopoly power in a market.

(a) Define privatisation. [2]

(b) Explain two causes of a fall in the birth rate. [4]

(c) Analyse, using a production possibility curve (PPC) diagram, the effects of a decrease in the
quantity of capital goods in an economy. [6]

(d) Discuss whether or not a government should allow monopolies. [8]

4 The use of supply-side policy measures, including deregulation, is moving China closer to a
market economic system. Some supply-side policy measures, such as education and subsidies,
can also increase a country’s economic growth rate. China joined the World Trade Organisation
in 2001 and has since removed some quotas on imports and reduced some import tariffs. These
measures may influence the size of its current account surplus.

(a) Define deregulation. [2]

(b) Explain two benefits consumers may gain from a market economic system. [4]

(d) Discuss whether or not a reduction in a country’s trade protection will reduce its current
account surplus. [8]

© UCLES 2020 0455/23/O/N/20

5 It was announced in November 2016 that 500 and 1000 rupee banknotes could no longer be used
in shops in India. These were replaced by the central bank, an institution that makes extensive
use of division of labour. In India, cash is still an important form of money used in economic
transactions. The replacement of banknotes put pressure on banking staff and other workers in
the tertiary sector, and affected the general price level.

(a) State two functions, other than issuing banknotes and coins, of a central bank. [2]

(b) Explain two reasons why workers in the tertiary sector may be paid more than workers in the
primary sector. [4]

(d) Discuss whether or not deflation will benefit an economy. [8]

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Cambridge IGCSE™

ECONOMICS 0455/22
Paper 2 Structured Questions February/March 2021

2 hours 15 minutes

You must answer on the enclosed answer booklet.

* 4 3 9 7 5 9 7 0 4 3 *

You will need: Answer booklet (enclosed)

INFORMATION
● The total mark for this paper is 90.
● The number of marks for each question or part question is shown in brackets [ ].

This document has 8 pages. Any blank pages are indicated.

DC (MB) 199838/2
© UCLES 2021 [Turn over
2

Section A

Read the source material carefully before answering Question 1.

Source material: Will Germany continue to be a strong economy?

Population fact file 2017 Germany world

population 81 million 7.5 billion
percentage of population aged over 65 22.0% 8.5%
average age 47.4 years 30.6 years

Germany is a country with a trade surplus and a high GDP per head. It also has a budget surplus
(government tax revenue greater than expenditure), a high HDI and a low inflation rate.

In recent years, German firms have exported a higher value of goods and services. This has contributed
to the growth of world trade, caused partly by a fall in transport costs. A relatively large number of
German firms produce both in Germany and in other countries, helped by better communications.

Germany is a major producer and exporter of luxury cars. Demand for luxury cars was influenced in
2018 by increases in incomes in Germany and abroad, a rise in the price of US luxury cars and, in
some countries, a fall in the price of petrol.

Improvements in the quality of education and information on job vacancies have made it easier
for workers to change jobs in Germany. This greater ability to change jobs has helped to reduce
unemployment and to increase the country’s output.

Fewer workers in the German car industry are now members of a trade union. As shown in Table 1.1,
trade union membership in Germany has declined in recent years.

Table 1.1 selected data on the German labour market 2013–2016

Trade union Unemployment Average annual

Size of labour force
Year membership rate wage
(millions)
(millions) (%) ($)
2013 18.0 42.2 5.4 40 567
2014 17.7 42.5 5.1 41 188
2015 17.6 42.8 4.8 42 084
2016 17.0 43.3 4.3 42 708

A challenge facing Germany is its ageing population. The effect of an older labour force is uncertain. It
may mean firms become reluctant to invest in new technology, but a shortage of young workers may
encourage firms to buy more capital goods.

Germany’s population may fall and there will soon be fewer Germans aged under 30 than over 60
unless immigration continues at a relatively high rate. Immigration might increase both the country’s
labour force and its government’s spending on education.

© UCLES 2021 0455/22/F/M/21

Answer all parts of Question 1. Refer to the source material in your answers.

1 (a) Calculate the number of Germans aged over 65 in 2017. [1]

(b) Identify two measures of living standards. [2]

(c) Explain one cause of globalisation. [2]

(d) Explain two advantages of an increase in the occupational mobility of labour. [4]

(e) Analyse why the price of German luxury cars may have increased in 2018. [4]

(f) Analyse whether the strength of German trade unions increased from 2013–2016. [5]

(g) Discuss whether or not an ageing labour force will reduce productivity. [6]

(h) Discuss whether or not immigration will increase a country’s budget surplus. [6]

© UCLES 2021 0455/22/F/M/21 [Turn over

Section B

Answer any three questions.

Each question is introduced by stimulus material. In your answer you may refer to this material and/or
to other examples that you have studied.

2 India has experienced a relatively high economic growth rate in recent years. This growth has
been driven by increases in government spending and exports, including exports of textiles. India’s
unemployment rate has, however, increased. The government is concerned that trying to reduce
unemployment may increase India’s inflation rate.

(a) Define economic growth. [2]

(b) Explain the possible opportunity cost to India of exporting more textiles. [4]

(d) Discuss whether or not a government can reduce unemployment without increasing inflation.
[8]

3 In the Netherlands in 2018, there were 1.3 bicycles per person and the world’s largest underground
bicycle parking area was built in the capital city. Land is scarce in city centres, where most cycling
takes place. Demand for bikes in the Netherlands is price-inelastic. Only a few people in the
Netherlands borrow money to buy bikes. The government encourages cycling by spending on
both bike parking areas and leisure cycle parks.

(a) Identify one difference between land and labour. [2]

(b) Explain two reasons why demand for a product may be price-inelastic. [4]

(d) Discuss whether or not a government should encourage more people to cycle. [8]

4 It is estimated that half of Egyptian men smoke. This is one of the highest rates in the world.
In recent years the Egyptian government has increased the tax on cigarettes. The government
and central bank have also tried to reduce inflation and improve Egypt’s international trade
performance. The Egyptian government could use subsidies to reduce its deficit on the current
account of its balance of payments.

(a) Identify two qualities of a good tax. [2]

(b) Explain two reasons why governments tax cigarettes. [4]

(c) Analyse how a central bank could reduce inflation. [6]

(d) Discuss whether or not an increase in government subsidies will reduce a deficit on the
current account of the balance of payments. [8]

© UCLES 2021 0455/22/F/M/21

5 Sweden has a mixed economic system. In 2018, it was operating at a point inside its production
possibility curve (PPC). In 2018, the country’s schools employed nearly 2500 extra teachers. A few
of these had previously been actors. A higher number had previously been government officials
involved with regulation of Swedish monopolies.

(a) Define a mixed economic system. [2]

(b) Explain the difference between a point inside a PPC and a point outside a PPC. [4]

(c) Analyse why an actor may decide to become a teacher. [6]

(d) Discuss whether all monopolies have low costs of production. [8]

© UCLES 2021 0455/22/F/M/21

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Cambridge IGCSE™

ECONOMICS 0455/21
Paper 2 Structured Questions May/June 2021

2 hours 15 minutes

You must answer on the enclosed answer booklet.

* 5 1 0 5 4 1 9 0 9 8 *

You will need: Answer booklet (enclosed)

INFORMATION
● The total mark for this paper is 90.
● The number of marks for each question or part question is shown in brackets [ ].

This document has 8 pages. Any blank pages are indicated.

DC (DH) 201166/1
© UCLES 2021 [Turn over
2

Section A

Read the source material carefully before answering Question 1.

Source material: changes in the Nigerian economy

Nigeria fact file 2017

Government spending $19.5bn
Tax revenue $12.9bn
Balance of trade in goods $10.4bn
Imports of goods $32.7bn

Nigeria produces a range of products including delivery vehicles, footwear, machines, maize and office
equipment. It does, however, depend heavily on oil for its exports. The government tries to encourage
an increase in the output and export of other products. To achieve this, it uses a range of policy
measures including changes in taxation and government spending e.g. subsidising the training of
construction workers. Successful training can increase job opportunities and wages. The government’s
aims are to improve Nigeria’s macroeconomic performance and to raise living standards.

Table 1.1 shows data on living standards in Nigeria and Ethiopia in 2017.

Table 1.1 Selected data on living standards in Nigeria and Ethiopia in 2017

Country GDP per Life expectancy Average years % of children

head ($) at birth (years) spent at school aged under 5 who
are underweight
Nigeria 5,900 59 9 31.5
Ethiopia 2,200 63 8 23.6

Investment in Nigeria has been growing slowly. Some firms are discouraged from spending on capital
goods by the relatively high interest rate, high corporation tax rate and economic uncertainty.

Nigeria’s population is increasing rapidly. The birth rate is high and the death rate is falling but it has
net emigration. Nigeria’s population was 191 million in 2017 and is forecast to grow to 402 million by
2050. An increase in its population size will create both challenges and opportunities. It will affect the
level of demand in the economy, may harm the environment and more food will be needed.

The Nigerian government increased the tariff on imported rice in 2016, to encourage an increase in its
own rice production. Nigeria is Africa’s largest producer of rice but also its largest importer. In 2018,
Nigeria imported almost 50% of the rice it consumed. Nigerian farmers produce less rice for every unit
of land used than Asian farmers and Nigerian farmers have high costs of production.

© UCLES 2021 0455/21/M/J/21

Answer all parts to Question 1. Refer to the source material in your answers.

1 (a) Calculate the value of Nigeria’s exports of goods in 2017. [1]

(b) Identify two examples of capital goods. [2]

(d) Explain how government spending on training may increase tax revenue in the long run. [4]

(e) Analyse how living standards in Nigeria compare with living standards in Ethiopia in 2017. [4]

(f) Analyse how a government could encourage firms to increase their investment. [5]

(g) Discuss whether or not an increase in Nigeria’s population will benefit its economy. [6]

(h) Discuss whether or not an increase in Nigeria’s import tariff on rice would increase the output
of Nigerian rice. [6]

© UCLES 2021 0455/21/M/J/21 [Turn over

Section B

Answer any three questions.

Each question is introduced by stimulus material. In your answers you may refer to the material and / or
to other examples you have studied.

2 There is an area of rubbish, three times the size of France, floating in the Pacific Ocean called
the Great Pacific Garbage Patch. It is made up of rubbish including old fishing nets but most is
plastic waste. It is forecast that, by 2050, there will be more plastic in the Pacific Ocean than fish.
A number of islands in the Pacific Ocean specialise in fishing. Greater pollution will increase the
social cost of the fishing industry.

(a) Identify the two types of costs that make up social cost. [2]

(b) Explain two causes of a shift to the right in the demand curve for fish. [4]

(c) Analyse how cleaning up pollution could benefit an economy. [6]

(d) Discuss whether or not countries specialising benefits consumers. [8]

3 In 2018, the US had its lowest unemployment rate for 18 years. Cyclical unemployment was
very low and so was the rate of inflation. The US also experienced a rise in labour productivity.
However, it did not do so well in reducing poverty. In 2018, approximately 12% of Americans were
living in poverty.

(a) Define cyclical unemployment. [2]

(b) Explain two ways a firm could increase the productivity of its workers. [4]

(c) Analyse the advantages of a low rate of inflation. [6]

(d) Discuss whether or not a fall in a country’s unemployment rate will reduce poverty in that
country. [8]

4 The Canadian government has introduced a number of policy measures designed to encourage
more women to enter the labour force. Canada’s labour force has reduced as its population
has aged. The number of workers and their output are influenced by changes in the country’s
foreign exchange rate and consumer expenditure. In 2018, the Canadian dollar fell in value while
Canadian consumer expenditure increased.

(a) Define the labour force. [2]

(b) Explain two causes of an ageing population. [4]

(c) Analyse how a fall in the value of a country’s foreign exchange rate could reduce a deficit on
the current account of its balance of payments. [6]

(d) Discuss whether or not an economy will benefit from an increase in consumer expenditure.
[8]

© UCLES 2021 0455/21/M/J/21

5 Australia experienced a drought in 2018 which caused its agricultural output to fall. Australia’s
secondary and tertiary sectors performed better in 2018 than its primary sector. All three sectors
were affected by the measures taken by the central bank to avoid deflation. Some firms benefited
from these measures and increased their output.

(a) Identify two industries, other than agriculture, that operate in the primary sector. [2]

(b) Explain two possible disadvantages to an economy of a fall in agricultural output. [4]

(c) Analyse how a central bank could avoid deflation. [6]

(d) Discuss whether or not a firm should have growth as its main objective. [8]

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Cambridge IGCSE™

ECONOMICS 0455/22
Paper 2 Structured Questions May/June 2021

2 hours 15 minutes

You must answer on the enclosed answer booklet.

* 6 1 8 0 4 7 2 8 0 7 *

You will need: Answer booklet (enclosed)

INFORMATION
● The total mark for this paper is 90.
● The number of marks for each question or part question is shown in brackets [ ].

This document has 8 pages. Any blank pages are indicated.

DC (DH/CB) 201167/2
© UCLES 2021 [Turn over
2

Section A

Read the source material carefully before answering Question 1.

Source material: Chilean cherries

Content removed due to copyright restrictions.

Producing just a few products can be risky for a country.

Content removed due to copyright restrictions.

Fig. 1.1 Population pyramids of Chile and Haiti 2018

© UCLES 2021 0455/22/M/J/21

Content removed due to copyright restrictions.

There is, however, evidence of market failure and inequality in

how resources are allocated.

Answer all parts of Question 1. Refer to the source material in your answers.

1 (a) Calculate Chile’s agricultural output in 2017. [1]

(b) Identify two disadvantages of a country specialising. [2]

(d) Explain how Chile’s population structure differs from Haiti’s population structure. [4]

(e) Analyse why China buys most of its cherries from Chile. [4]

(f) Analyse why Chilean astronomers are paid more than Chilean farm workers. [5]

(g) Discuss whether or not Chilean consumers would benefit from more government intervention
in the economy. [6]

(h) Discuss whether or not the Haitian economy would benefit from fewer of its people working in
Chile. [6]

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Section B

Answer any three questions.

Each question is introduced by stimulus material. In your answers you may refer to the material and / or
to other examples you have studied.

2 Nearly one million people in Cairo, the capital city of Egypt, live in crowded, unhealthy housing.
One reason why people lack basic necessities, including adequate housing, is unemployment. In
2019, nearly 10% of Cairo’s workers did not have a job. Other citizens of Cairo live in luxury, in
houses costing more than $1 million. Many of Cairo’s rich adults grew up in rich families.

(a) Identify two basic necessities, other than housing. [2]

(b) Explain how frictional unemployment differs from cyclical unemployment. [4]

(d) Discuss whether a government should provide subsidies to families to spend on housing. [8]

3 Consumers in Uruguay are eating more processed foods. Factors of production, including
enterprise, have responded to this change. Firms in the processed food industry have become
more capital-intensive. All of Uruguay’s industries were affected by the rise in its inflation rate,
from 6.2% in 2017 to 7.7% in 2018.

(a) Define enterprise. [2]

(b) Explain the influence of opportunity cost on consumers’ decisions. [4]

(c) Analyse why a firm may become more capital-intensive. [6]

(d) Discuss whether inflation harms a country’s industries. [8]

4 Turkey’s birth rate is falling which is likely to reduce its supply of labour. However, improvements
in the quality of labour and the increase in foreign multinational companies (MNCs) operating in
Turkey (the host country to the MNCs) may help the economy avoid a recession. One reason why
economists are worried that a recession may occur is an expected rise in the interest rate.

(a) Define birth rate. [2]

(b) Explain two causes of an increase in the quality of labour in a country. [4]

(d) Discuss whether or not MNCs improve the economic performance of the host countries in
which they operate. [8]

© UCLES 2021 0455/22/M/J/21

5 The money supply in Bangladesh increased every year from 2010 to 2018. Changes in the
money supply and the foreign exchange rate can affect a government’s macroeconomic policy
aims, including full employment. There have been few mergers between commercial banks in
Bangladesh, although its banks are larger than many of its other firms.

(a) Identify two functions of money. [2]

(b) Explain two reasons why commercial banks may want to merge. [4]

(d) Discuss whether or not it is an advantage to keep a firm small. [8]

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Cambridge IGCSE™

ECONOMICS 0455/23
Paper 2 Structured Questions May/June 2021

2 hours 15 minutes

You must answer on the enclosed answer booklet.

* 1 5 8 1 0 5 5 6 0 5 *

You will need: Answer booklet (enclosed)

INFORMATION
● The total mark for this paper is 90.
● The number of marks for each question or part question is shown in brackets [ ].

This document has 8 pages. Any blank pages are indicated.

DC (DH/CB) 201168/4
© UCLES 2021 [Turn over
2

Section A

Read the source material carefully before answering Question 1.

Source Material: Morocco’s blue economy

Morocco fact file 2017

GDP $109 billion
Contribution of fishing industry to GDP 2%
Population 35.74 million
Continent Africa

The World Bank defines a ‘blue economy’ as an economy which uses ocean resources sustainably for
economic growth and creates employment to improve the livelihoods of its people. Making full use of
the blue economy may reduce the level of poverty among fishermen. Many fishermen globally still live
in poverty due to low wages and seasonal and structural unemployment.

Morocco is the leading supplier of fish in Africa. Despite the length of the Moroccan coastline, the fishing
industry currently makes a very small contribution to Morocco’s GDP. The government, therefore, wants
to further increase the size of the fishing industry. Policy measures, such as subsidies to fishermen,
could help Moroccan fishermen increase productivity and reduce competition from abroad.

The United Nations’ Food and Agricultural Organisation (FAO) forecasts that Moroccan fisheries’ output
could rise to nearly 2 million tonnes of fish per year by 2030. The global demand for fish is also on a
steep upward trend as more people see the benefits of eating fish rather than meat. Such increases
could help reduce the deficit on Morocco’s current account of its balance of payments.

Increased dependence on the primary sector may not improve living standards in Morocco because
some other countries who have done the same have had disappointing outcomes. Fig. 1.1 shows the
GDP per head ($) and percentage (%) contribution of the primary sector to GDP of selected countries.

60 000 Australia
50 000 Germany
GDP per head ($)

40 000
South Korea
30 000

20 000
Bulgaria Malaysia
10 000
Morocco India Pakistan
0
0% 5% 10% 15% 20% 25%
% Contribution of primary sector to GDP

Fig. 1.1 GDP per head ($) and % contribution of primary sector to GDP of selected countries

Environmentalists worry that there is no proper regulation of fishing in Morocco. If overfishing occurs,
fish stocks would be reduced for future generations. However, if fish stocks are maintained, the
economy can continue its high economic growth rate. At a time when African countries are reducing
trade protection, a sustainable fishing industry could be very positive for Morocco’s future.

© UCLES 2021 0455/23/M/J/21

Answer all parts of Question 1. Refer to the source material in your answers.

1 (a) Calculate, in $s, the contribution of the fishing industry to Morocco’s GDP in 2017. [1]

(b) Identify two macroeconomic aims, other than balance of payments stability, that the Moroccan
government could achieve through the blue economy. [2]

(c) Explain why an increase in the global demand for fish could reduce a deficit in Morocco’s
current account of its balance of payment. [2]

(d) Explain two causes of poverty amongst fishermen. [4]

(e) Analyse whether GDP per head always increases when the percentage (%) contribution of
the primary sector increases. [4]

(f) Analyse how regulation of fishing could ensure economic growth is sustained for future
generations. [5]

(g) Discuss whether or not subsidies to fishermen could help the Moroccan economy. [6]

(h) Discuss whether or not a reduction in trade protection by other African countries would be
beneficial for Morocco. [6]

© UCLES 2021 0455/23/M/J/21 [Turn over

Section B

Answer any three questions.

Each question is introduced by stimulus material. In your answer you may refer to this material and / or
to other examples that you have studied.

2 Latvia is one of the fastest growing economies in Europe. Although its GDP per head is below the
European average, it is quickly catching up. Living standards are improving. At the same time, a
decrease in borrowing has reduced the chance of high inflation. The job market is also improving
as the unemployment rate is falling. However, there are concerns that there might be less balance
of payments stability.

(a) Identify two indicators of living standards. [2]

(b) Explain how a decrease in borrowing could reduce the chance of high inflation. [4]

(d) Discuss whether or not having a lower GDP will be a disadvantage to an economy. [8]

3 Cyclical unemployment is below the national average in some big cities in Canada such as Toronto,
Vancouver, and Montreal. This could be a result of higher government spending and tax cuts in
big cities. However, productivity is low. There are also concerns that structural unemployment may
increase as some industries cannot compete with more efficient foreign firms.

(a) Define structural unemployment. [2]

(b) Explain two causes of low productivity. [4]

(d) Discuss whether or not competition between firms in the same industry is always a
disadvantage to workers. [8]

4 Global spending on the health sector, by both the private and public sectors, is the highest
compared with all other sectors including education and defence. Investment in education and the
health sector has resulted in new life-saving technology being introduced. However, demand for
certain vaccinations has decreased over the years, shifting the demand curve of vaccinations to
the left.

(a) Define investment. [2]

(b) Explain two causes of a shift of a product’s demand curve to the left. [4]

(c) Analyse, using a production possibility curve diagram (PPC), the effect of increased
investment in both education and the health sector. [6]

(d) Discuss whether consumers would benefit more from healthcare being provided by the
private sector or the public sector. [8]

© UCLES 2021 0455/23/M/J/21

5 The demand for smartphones has become more price-inelastic as the range of functions available
has increased. In low-income countries, smartphones are an important tool for economic
development. This is because they provide access to education and banking services which were
once not available in rural areas. Smartphones have made it easier for people to borrow and save
their money.

(a) Define economic development. [2]

(b) Explain two reasons why children in rural areas may receive less education than those in
cities. [4]

(d) Discuss whether or not an increase in the level of savings is beneficial for an economy. [8]

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Cambridge IGCSE™

ECONOMICS 0455/21
Paper 2 Structured Questions October/November 2021

2 hours 15 minutes

You must answer on the enclosed answer booklet.

* 6 9 5 8 0 4 9 6 6 5 *

You will need: Answer booklet (enclosed)

INFORMATION
● The total mark for this paper is 90.
● The number of marks for each question or part question is shown in brackets [ ].

This document has 8 pages. Any blank pages are indicated.

DC (KN) 203612/2
© UCLES 2021 [Turn over
2

Section A

Read the source material carefully before answering Question 1.

Source Material: Laos, a land-locked country

Laos fact file 2017

GDP $16.85 billion
total exports $2.04 billion
percentage of Laos’ exports sold to China 58%
GDP growth rate 6.9%
adult literacy rate 85%

Laos is a land-locked country, surrounded by Vietnam, Cambodia, Thailand, Myanmar and China.
Access to seaports helps an economy take full advantage of international trade. The economy of Laos
has grown rapidly since the government initiated free market reforms, with an average growth rate of
approximately 7% annually in the last 10 years.

The free market reforms have encouraged Laos to sell their abundant raw materials internationally
and also attracted foreign investment. Laos has large deposits of copper which are in high demand by
global manufacturing industries. A new rail link connecting China and Laos is expected to make such
transactions easier.

The government of Laos has also put a lot of emphasis on education. The adult literacy rate of both
males and females has increased from 60% to 85% over the last 20 years.

The financial sector, including commercial banks, is growing. This has enabled local entrepreneurs to
borrow money and encouraged more households to save.

However, investors are still uncertain about investing in Laos. There are strict rules and regulations
for foreign investors, especially in industries such as mining. The government says the regulations
are needed to avoid market failures, such as external costs, and abuse of monopoly power. However,
these rules and regulations are sometimes unclear. Laos is one of the lowest in the World Bank’s Ease
of Doing Business index, which measures how easy it is to start up and run a business in a country.
Fig. 1.1 shows the Ease of Doing Business ranking (1 = easy) and GDP per head of selected countries
in 2018.

Ease of Doing Business

Country GDP per head ($)
ranking
Singapore 2 64 581
South Korea 5 31 362
Malaysia 15 11 239
Brunei 55 31 627
Laos 154 2567
Timor-Leste 178 2035

Fig. 1.1 The Ease of Doing Business ranking and GDP per head ($) of selected
countries in 2018

The recent economic slowdown of China may have harmful effects on Laos. China is Laos’s largest
trading partner and also the largest source of foreign investment into Laos.

© UCLES 2021 0455/21/O/N/21

Answer all parts of Question 1. Refer to the source material in your answers.

1 (a) Calculate, in $, the total exports of Laos to China in 2017. [1]

(b) Identify two roles of commercial banks. [2]

(c) Explain how access to seaports may benefit an economy. [2]

(d) Explain two benefits of the free market reforms introduced by the government of Laos. [4]

(e) Analyse the impact of improved education on the economy of Laos. [4]

(f) Analyse the relationship between a country’s Ease of Doing Business ranking and its GDP
per head. [5]

(g) Discuss whether or not strict rules and regulations benefit an economy. [6]

(h) Discuss whether or not a slowdown of China’s economy will be harmful to the economy of
Laos. [6]

© UCLES 2021 0455/21/O/N/21 [Turn over

Section B

Answer any three questions.

Each question is introduced by stimulus material. In your answer you may refer to this material and/or
to other examples that you have studied.

2 In 2019, the government of France proposed a 3% tax on the revenue of large firms that advertise
and sell products online. This tax may lead to a redistribution of income. There are concerns that
this tax may also lead to a reduction in France’s export of services as firms affected may leave
France. However, the government hopes that supply-side policy measures will encourage such
firms to stay in France.

(a) Define redistribution of income. [2]

(b) Explain two reasons why governments redistribute income. [4]

(d) Discuss whether or not supply-side policy measures will encourage firms to operate in an
economy. [8]

3 The island of Borneo is famous internationally for its rainforests which can bring many benefits,
both private and external. However, the economy is heavily dependent on a finite resource, oil.
The discovery of oil reserves in other parts of the world led to a significant fall in the world price of
oil. This affected producers of oil in Borneo.

(a) Define finite resource. [2]

(b) Explain the difference between private and external benefits. [4]

(c) Analyse, using a demand and supply diagram, the effects on the world price of oil of the
discovery of new reserves of oil. [6]

(d) Discuss whether or not the fall in the price of a product is a disadvantage to an economy. [8]

4 Uruguay’s inflation rate reached 8.4% in July 2018. The central bank considered increasing the
interest rate to reduce the inflation rate. An increase in interest rates might influence total demand
in an economy and lead to an appreciation of its currency. This might influence Uruguay’s exports,
especially soybean exports. The total revenue of Uruguay’s soybean firms might change if there is
an appreciation of the Uruguayan peso.

(a) Define total revenue. [2]

(b) Explain two causes of inflation. [4]

(d) Discuss whether or not an appreciation of a country’s domestic currency will have negative
effects on its economy. [8]

© UCLES 2021 0455/21/O/N/21

5 Some economists criticise high government spending and trade unions for creating market
disequilibrium. However, trade unions may also play a key role in economic development. There
are over 60 trade unions in Singapore, in both labour-intensive and capital-intensive industries.

(a) Define market disequilibrium. [2]

(b) Explain the difference between labour-intensive and capital-intensive industries. [4]

(d) Discuss whether or not high government spending can help a government achieve its
macroeconomic aims. [8]

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Cambridge IGCSE™

ECONOMICS 0455/22
Paper 2 Structured Questions October/November 2021

2 hours 15 minutes

You must answer on the enclosed answer booklet.

* 9 5 2 4 8 9 4 5 1 1 *

You will need: Answer booklet (enclosed)

INFORMATION
● The total mark for this paper is 90.
● The number of marks for each question or part question is shown in brackets [ ].

This document has 8 pages. Any blank pages are indicated.

DC (DH) 314876/1
© UCLES 2021 [Turn over
2

Section A

Read the source material carefully before answering Question 1.

Source material: India’s airline industry

Air India fact file

total revenue 2018 $2.2 bn
total cost 2018 $2.9 bn
number of passengers carried in 2018 16.4 m
number of passengers carried in 2017 14.8 m
share of India’s international and national air travel market in 2018 13%
share of India’s international and national air travel market in 1994 100%

Air India is owned by the Indian government. The entry of new firms into India’s air travel market has
reduced Air India’s ability to set price. The state-owned firm faces competition not only from other
airlines but also from other forms of transport including trains and ships.

In 2017 the Indian government tried, unsuccessfully, to sell Air India to the private sector. A successful
sale would have raised money for the Indian government and might have increased the airline’s
efficiency.

It is predicted that India will have the third largest airline industry by 2025. The growth in the industry
may affect the current account position of India’s balance of payments. Table 1.1 shows the current
account position in India and four other countries.

Table 1.1 The current account position of the balance of payments of selected countries in 2017

Country Current account Current account

($ bn) % of GDP
Brazil –9.8 –0.5
China 164.9 1.4
India –48.7 –1.9
Kenya –5.4 –6.8
Russia 35.4 2.2

A rise in both the number of routes flown and the quality of the passenger experience may increase
the number of tourists visiting India. A larger Indian airline industry is likely to increase the ease of
movement of people and goods into and out of India. This might attract more multinational companies
(MNCs) and reduce firms’ costs of production.

India’s air travel market faces a number of challenges. India has Asia’s highest airline fuel tax. Some
economists suggest that this should be increased further to increase tax revenue and to reduce market
failure. The airlines’ other costs are rising but it is difficult for them to raise prices. This is because
India’s air passengers are among the most price-sensitive in the world. Some airlines stop their costs
rising any further by improving their staff training, introducing new technology and improving their pilots’
working conditions. The airlines’ ability to hire pilots is influenced by, among other factors, the quality of
education and other job opportunities.

© UCLES 2021 0455/22/O/N/21

Answer all parts of Question 1. Refer to the source material in your answers.

(a) Calculate, in $, Air India’s loss in 2018. [1]

(b) Identify two substitutes for air travel. [2]

(d) Explain two reasons why a government may privatise an industry. [4]

(e) Analyse how India’s position on the current account of its balance of payments in 2017
compares with the other four countries. [4]

(f) Analyse how a successful airline industry can promote economic growth. [5]

(g) Discuss whether the Indian government should increase the tax on airline fuel. [6]

(h) Discuss whether more people will apply to be pilots for Indian airlines in the future. [6]

© UCLES 2021 0455/22/O/N/21 [Turn over

Section B

Answer any three questions.

Each question is introduced by stimulus material. In your answers you may refer to the material and/or
to other examples you have studied.

2 A number of countries, including Morocco, capture water from fog. Water is used in the primary,
secondary and tertiary sectors. In recent years, Morocco has increased the quantity and quality
of its resources and has moved more of them into the tertiary sector. The quantity, quality and
composition of a country’s resources are influenced by a number of factors, including its birth rate.
Morocco’s birth rate fell from 19.9 in 2016 to 18.7 in 2018.

(a) Define a free good. [2]

(b) Explain, with examples, the difference between the secondary sector and the tertiary sector.
[4]

(c) Analyse, using a production possibility curve (PPC), the effect of an increase in the quality of
its resources on an economy. [6]

(d) Discuss whether or not a fall in a country’s birth rate will benefit an economy. [8]

3 Two of Uzbekistan’s main industries are cotton and gas. Uzbekistan is the world’s seventh largest
producer, and fifth largest exporter, of cotton. The Uzbek government has tried to influence the
cotton industry’s price elasticity of supply. It has also nearly ended the use of child labour in cotton
production. The country’s output of gas increased by 7% in 2018 and its average cost of gas
production fell.

(a) Identify two determinants of price elasticity of supply. [2]

(b) Explain two advantages to an economy of ending child labour. [4]

(d) Discuss whether or not an economy would benefit from allocating more of its resources to
agriculture. [8]

4 In Tunisia, resource allocation decisions are made by both the public sector and private sector.
Tunisia’s GDP increased from 2014 to 2018 but its households saved less. Income levels can be
affected by changes in trade union activity and the foreign exchange rate. From 2014 to 2018,
Tunisia experienced a number of strikes organised by its largest trade union, the Tunisian General
Labour Union. There was also a significant fall in its foreign exchange rate.

(a) Identify two of the three resource allocation decisions. [2]

(b) Explain two reasons why households may save less even though their income has increased.
[4]

(d) Discuss whether or not a fall in its foreign exchange rate will improve a country’s
macroeconomic performance. [8]

© UCLES 2021 0455/22/O/N/21

5 The US operates a mainly market economic system. Life expectancy in the US fell in 2017, for the
third year in a row. Although the US has a high GDP per head, it also has a high level of income
inequality. The poor benefited from the US’s low and stable inflation rate. The government’s
supply-side policy measures were partly responsible for reducing inflationary pressure.

(a) Identify two ways a government could reduce income inequality. [2]

(b) Explain two advantages of a market economic system. [4]

(c) Analyse why life expectancy may decrease. [6]

(d) Discuss whether or not supply-side policy measures can reduce inflation. [8]

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Cambridge IGCSE™

ECONOMICS 0455/23
Paper 2 Structured Questions October/November 2021

2 hours 15 minutes

You must answer on the enclosed answer booklet.

* 6 8 7 9 5 4 1 1 3 3 *

You will need: Answer booklet (enclosed)

INFORMATION
● The total mark for this paper is 90.
● The number of marks for each question or part question is shown in brackets [ ].

This document has 8 pages. Any blank pages are indicated.

DC (DH/CB) 203610/3
© UCLES 2021 [Turn over
2

Section A

Read the source material carefully before answering Question 1.

Source material: Changing eating habits

Obesity fact file 2016

Country Population (million) Obesity % (percentage of population overweight)
Senegal 15 9
UK 65 28
US 330 36

Concerns about health, obesity and animal welfare have risen in high income countries. This led to
an increase in vegetarianism (not eating meat) and veganism (not eating meat, eggs or dairy) in high
income countries. In 2017, veganism increased in the UK by 20%. As incomes rise in the UK, people
are more likely to eat vegan food. Advertising vegan food has encouraged its consumption.

It is claimed that eating vegan food can improve people’s health. Healthier workers can produce more,
and better quality, products. Eating less meat and dairy products can also improve the environment.
Farm animals emit greenhouse gases and their waste products add to water pollution.

While meat consumption per person is falling in high income countries, it is rising in low income
countries. Fig. 1.1 shows average daily calorie intake consumed in Senegal, a west African country,
and in the US, by food groups in 2015. The recommended daily calorie intake is 2800.

Senegal calorie intake = 2320 US calorie intake = 3800

Cereals/grains Meat Sugar & sweeteners Fruit & vegetables Added fats & oils

Fig. 1.1 Average daily calorie intake in Senegal and the US by food groups in 2015

To respond to changes in the type of food that people are eating, it is useful if workers are mobile.
Generally, the greater labour mobility, the more efficient the labour market becomes in adjusting to
changes in demand, and the supply of workers. This helps a country’s international performance in
trade of goods.

As some people in Africa are malnourished, eating more food of any type, including meat, may make
them healthier. A rise in meat consumption will increase demand for vets (for animal welfare) and
transport firms. It can also increase the number of meat processing firms.

Senegal has a high unemployment rate and a low income per head. It has recently experienced a fall
in consumer expenditure. New industries and new jobs would help to stop Senegal experiencing a
recession. A rise in government spending may also be needed. The high birth rate and rising population
also puts pressure on the government to spend more. Emigration is, however, reducing tax revenue
while providing some Senegalese with useful employment experience.
© UCLES 2021 0455/23/O/N/21
3

Answer all parts of Question 1. Refer to the source material in your answers.

1 (a) Calculate the number of obese people in the UK in 2016. [1]

(b) Identify two reasons why the demand for vegan food has increased in the UK. [2]

(d) Explain how food consumption in Senegal differed from the US in 2015. [4]

(e) Analyse how an increase in labour mobility could improve the performance of a country’s
trade in goods. [4]

(f) Analyse how an increase in meat consumption could benefit African economies. [5]

(g) Discuss whether or not an increase in Senegalese government spending will stop the country
experiencing a recession. [6]

(h) Discuss whether or not emigration would reduce poverty in Senegal. [6]

© UCLES 2021 0455/23/O/N/21 [Turn over

Section B

Answer any three questions.

Each question is introduced by stimulus material. In your answers you may refer to the material and/or
to other examples you have studied.

2 In 2018, 54% of Russia’s population was female and the government announced plans to raise the
state retirement age. In Russia, the role of the price mechanism to answer key resource allocation
questions is increasing. However, the Russian government raised indirect taxes, partly to reduce
market failure.

(a) Identify two reasons why a country may have more women than men in its population. [2]

(b) Explain two advantages of raising the retirement age. [4]

(d) Discuss whether or not indirect taxation can reduce market failure. [8]

3 South Africa has a high number of unemployed workers. South Africa’s inflation rate has been
stable in recent years, partly due to relatively stable wages. An increase in wages can cause
inflation and can increase the number of consumer goods bought and produced. To increase
employment and reduce the deficit on the current account of South Africa’s balance of payments,
some economists suggest more foreign multinational companies (MNCs) should be encouraged
to produce in South Africa.

(a) Identify two ways unemployment is measured. [2]

(b) Explain two ways an increase in wages can cause inflation. [4]

(c) Analyse, using a production possibility curve (PPC), the opportunity cost to an economy of
producing more consumer goods. [6]

(d) Discuss whether or not an increase in foreign MNCs will reduce a deficit on the current
account of the balance of payments of a host country. [8]

4 Norway has engaged in free trade to a greater extent in recent years. The country operates a
floating foreign exchange rate. There has been a change in the pattern of employment in Norway.
For example, more Norwegians now work in jobs requiring a university degree. Some of these
graduates work as economists and lawyers dealing with mergers between firms. In 2017, there
were 332 mergers, an increase of 23% on the previous year.

(a) Identify two benefits of free trade. [2]

(b) Explain two differences between a floating foreign exchange rate and a fixed foreign
exchange rate. [4]

(d) Discuss whether or not a government should stop firms merging. [8]

© UCLES 2021 0455/23/O/N/21

5 Industries and markets are changing in Vietnam. There is greater use of division of labour in
a range of industries. Many markets are becoming more competitive, causing some firms to
make losses. Manufacturing was Vietnam’s strongest sector in 2018, when manufacturing output
increased by 13%.

(a) Define division of labour. [2]

(b) Explain two reasons why a loss-making firm may continue to produce. [4]

(d) Discuss whether or not an increase in a country’s manufacturing output will increase its
economic development. [8]

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Cambridge IGCSE™

ECONOMICS 0455/22
Paper 2 Structured Questions February/March 2022

2 hours 15 minutes

You must answer on the enclosed answer booklet.

* 9 3 0 7 2 5 9 7 3 1 *

You will need: Answer booklet (enclosed)

INFORMATION
● The total mark for this paper is 90.
● The number of marks for each question or part question is shown in brackets [ ].

This document has 8 pages. Any blank pages are indicated.

DC (PQ/FC) 303889/2
© UCLES 2022 [Turn over
2

Section A

Read the source material carefully before answering Question 1.

Source material: The advantages of visiting, producing and living in Bermuda

Bermuda fact file 2018

Population 72 000

Labour force 33 500

Unemployment rate 7%

Inflation rate 2%

Bermuda is a well-known holiday destination. It offers luxury holidays which are expensive.

Bermuda bans foreign fast-food outlets. It does have one foreign outlet selling fried chicken in the
island’s capital, Hamilton. This was opened before the ban was introduced in 1997. Some foreign
multinational companies (MNCs), which produce other goods and services, operate in Bermuda.
Bermuda is considered a tax haven. It does not have any corporation tax, but it does charge high
import tariffs particularly on demerit goods which are harmful to health.

Bermuda has a higher literacy rate and a lower population growth rate than most other countries. Its
GDP per head is high. Fig. 1.1 shows the relationship between GDP per head ($) and life expectancy
(years) in selected countries in 2018.

200 000
Monaco
180 000
160 000
140 000
GDP
per 120 000
Bermuda
head 100 000
($)
80 000
USA
60 000
Bahamas
40 000
20 000 Eswatini Argentina
0
0 10 20 30 40 50 60 70 80 90 100
Life expectancy (years)

Fig. 1.1 The relationship between GDP per head ($) and life expectancy (years)
in selected countries 2018

© UCLES 2022 0455/22/F/M/22

Bermuda also has a relatively larger tertiary sector than most other countries. Insurance and other
financial services contributed 85% of its GDP in 2018. The Bermudian Monetary Authority (BMA)
carries out most of the functions of a central bank. For example, it acts as banker to the government,
holds the country’s reserves of foreign currency and implements the government’s monetary policy. The
BMA has been relatively successful in keeping inflation low. However, government policy measures
designed to reduce unemployment may affect the inflation rate. This is because policy measures can
influence total demand, productivity and firms’ costs of production.

Bermudian government policy may change, not only to cut unemployment, but also to reduce market
failure. For example, higher indirect taxes on demerit goods may be used but it can be difficult to
change people’s spending patterns.

Answer all parts of Question 1. Refer to the source material in your answers.

1 (a) Calculate the number of Bermudian workers who were unemployed in 2018. [1]

(b) Identify two reasons why demand for holidays in Bermuda may be price-elastic. [2]

(d) Explain two reasons why Bermuda has a higher level of economic development than many
other countries. [4]

(e) Analyse the role of the Bermudian Monetary Authority (BMA). [4]

(f) Analyse the relationship between GDP per head and life expectancy. [5]

(g) Discuss whether or not Bermudian government policy measures designed to reduce
unemployment would increase the inflation rate. [6]

(h) Discuss whether or not higher indirect taxes can reduce the market failure caused by demerit
goods. [6]

© UCLES 2022 0455/22/F/M/22 [Turn over

Section B

Answer any three questions.

Each question is introduced by stimulus material. In your answer you may refer to this material and/or
to other examples that you have studied.

2 South Africa (SA) experienced a recession in the second half of 2019 and an unemployment
rate of 29%. Only a small proportion of this unemployment was frictional. South Africa’s foreign
exchange rate fell from 1 SA rand = US$0.08 in 2018 to 1 SA rand = US$0.06 in 2019. South
Africa had reduced import tariffs, but in 2019 some South African economists suggested tariffs
should be used to protect its infant industries.

(a) Define frictional unemployment. [2]

(b) Explain why an infant industry may need protection. [4]

(c) Analyse how a fall in a country’s foreign exchange rate could reduce a deficit on the current
account of its balance of payments. [6]

(d) Discuss whether or not a reduction in income tax will end a recession. [8]

3 New Zealand is a small country with a population of 5 million. Most New Zealand firms are
relatively small and most do not experience diseconomies of scale. In 1894, New Zealand was the
first country to introduce a national minimum wage. New Zealand experienced a rise in income per
head every year between 2010 and 2019. During this period, 6% of New Zealand’s households
experienced absolute poverty.

(a) Define diseconomies of scale. [2]

(b) Explain two reasons why a high-income household may borrow more than a low-income
household. [4]

(c) Analyse, using a diagram, the effect of an increase in output on average fixed cost (AFC) and
total fixed cost (TFC). [6]

(d) Discuss whether or not the introduction of a national minimum wage will reduce poverty. [8]

4 Botswana’s net migration varies. In 2019, Botswana had net immigration. Since 2010, its
unemployment rate has averaged 18%. Between 2010 and 2019, the number of women in the
labour force increased from 380 000 to 490 000. Although Botswana is one of Africa’s richer
countries, its households do not save much of their income.

(a) Identify two reasons why immigration may increase. [2]

(b) Explain two consequences of unemployment. [4]

(d) Discuss whether or not a government should encourage an increase in saving. [8]

© UCLES 2022 0455/22/F/M/22

5 The economic problem means that countries have to decide what to produce. Ghana uses much
of its agricultural land to grow cocoa. Cocoa is sold to chocolate producers. The world’s main
chocolate producer in 2019 was a US firm with a 14% share of the global market. That firm was
the largest seller of chocolate in the US and, if it merges, may become a monopoly.

(a) Define the economic problem. [2]

(b) Explain whether land is mobile. [4]

(d) Discuss whether or not consumers would benefit from a firm becoming a monopoly. [8]

© UCLES 2022 0455/22/F/M/22

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Cambridge Assessment International Education is part of Cambridge Assessment. Cambridge Assessment is the brand name of the University of Cambridge
Local Examinations Syndicate (UCLES), which is a department of the University of Cambridge.

© UCLES 2022 0455/22/F/M/22

Cambridge IGCSE™

ECONOMICS 0455/21
Paper 2 Structured Questions May/June 2022

2 hours 15 minutes

You must answer on the enclosed answer booklet.

* 1 9 4 1 2 7 9 0 1 5 *

You will need: Answer booklet (enclosed)

INFORMATION
● The total mark for this paper is 90.
● The number of marks for each question or part question is shown in brackets [ ].

This document has 8 pages. Any blank pages are indicated.

DC (KS/FC) 303844/3
© UCLES 2022 [Turn over
2

Section A

Read the source material carefully before answering Question 1.

Source material: Cyprus

Cyprus fact file 2015 2019

Life expectancy (years) 79 81
GDP per head $23 334 $27 900
Population 1 100 000 1 200 000
Birth rate (per 1000) 11.0 10.2

Cyprus is a small country which had a relatively high HDI ranking in 2019. It exports a range of goods
and services including fruit, pharmaceuticals and clothing. Cyprus imports the majority of the food it
consumes but produces most of its own grapes and potatoes. In 2019, the global grape harvest was
affected by bad weather. Global grape production fell by 35% which caused a shortage.

Approximately 14% of Cyprus’s labour force is employed in the primary sector. The average age
of Cyprus’s workers is increasing and more of them are now working past retirement age. This is
particularly true of highly qualified workers who tend to be well-paid, healthy and have jobs that do not
require physical strength.

The rise in life expectancy and the increase in the cost of providing state pensions led some economists
to suggest a rise in the retirement age. Such a change would have an impact on the government’s
budget balance. In 2019, the Cypriot government had a budget surplus. In contrast, Cyprus had a
deficit on the current account of its balance of payments. The size of a country’s current account
balance can be influenced by its inflation rate. Fig. 1.1 shows selected countries’ inflation rates (%) and
current account balances (% of GDP) in 2019.

Cyprus Iceland Kenya Mongolia Nepal Slovenia

10
5
% 0
–5
–10
–15
–20
Inflation rate (%) Current account balance as % of GDP

Fig. 1.1 Inflation rates (%) and current account balances (% of GDP)
in selected countries 2019

The interest rate in Cyprus was very low in 2019. It was expected that this would influence the country’s
investment. Since 2015, some of the country’s firms have become more capital-intensive. This change
has affected Cyprus’s productivity and may have influenced the standard of products produced.

In 2019, two concerns for the future of Cyprus’s economy were that the quality of some of its agricultural
land may decline and that some of its top entrepreneurs may emigrate.

© UCLES 2022 0455/21/M/J/22

Answer all parts of Question 1. Refer to the source material in your answers.

1 (a) Calculate the number of births in Cyprus in 2019. [1]

(b) Identify two indicators of living standards. [2]

(d) Explain two reasons why more well-educated workers tend to work past retirement age than
less-educated workers. [4]

(e) Analyse how a rise in a country’s retirement age is likely to affect its government’s budget. [4]

(f) Analyse the relationship between inflation rates and current account balances. [5]

(g) Discuss whether or not, after 2019, Cyprus’s production possibility curve (PPC) is likely to
shift to the right. [6]

(h) Discuss whether or not adopting capital-intensive production will benefit consumers. [6]

© UCLES 2022 0455/21/M/J/22 [Turn over

Section B

Answer any three questions.

Each question is introduced by stimulus material. In your answer you may refer to this material and/or
to other examples that you have studied.

2 Australia’s foreign exchange rate fluctuates. The value of Australia’s exports is regularly greater
than the value of its imports. Australia is Papua New Guinea’s main trading partner. In 2019, the
government of Papua New Guinea increased income tax to reduce its inflation rate. It used other
policy measures to increase its economic growth rate.

(a) Define foreign exchange rate. [2]

(b) Explain two reasons why the value of a country’s exports may be greater than the value of its
imports. [4]

(d) Discuss whether or not governments should aim for a high rate of economic growth. [8]

3 Trade union membership is much higher in Sweden than in most countries. In 2019, 70%
of Swedish workers were members of a trade union. More than 85% of Swedish workers are
employed in the tertiary sector, compared with only 2% in the primary sector. Swedish workers
spend their incomes on a variety of products some of which, e.g. sweets, are demerit goods.
Sweden has the 7th highest per head consumption of sweets in the world.

(a) Identify two influences on what products a person buys. [2]

(b) Explain two ways a government could decrease the consumption of demerit goods. [4]

(c) Analyse why workers may join a trade union. [6]

(d) Discuss whether or not tertiary sector workers are paid more than primary sector workers. [8]

4 Uganda specialises in agricultural products and has a relatively small secondary sector. In the
1990s, the Ugandan government privatised most of its firms, including banks and railways.
Some economists thought this privatisation was unsuccessful because poverty increased and
unemployment remained high. In recent years, the Ugandan government has used supply-side
policy measures to reduce unemployment.

(a) Define privatisation. [2]

(b) Explain the difference between absolute poverty and relative poverty. [4]

(c) Analyse how specialisation can benefit firms. [6]

(d) Discuss whether or not the use of supply-side policy measures will reduce unemployment. [8]

© UCLES 2022 0455/21/M/J/22

5 Singapore is a high-income country with a shortage of land and labour. Singapore is often given
as an example of a market economy. The Singaporean government does, however, intervene
in the economy. For example, it encourages its population to eat two servings of fruit and two
servings of vegetables per day.

(a) Identify the reward to labour and the reward to land. [2]

(b) Explain how an increase in a worker’s income can affect their mobility of labour. [4]

(c) Analyse, using a demand and supply diagram, how a greater awareness of the health benefits
of eating fruit will affect the market for fruit. [6]

(d) Discuss whether or not a market economic system benefits an economy. [8]

© UCLES 2022 0455/21/M/J/22

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© UCLES 2022 0455/21/M/J/22

Cambridge IGCSE™

ECONOMICS 0455/22
Paper 2 Structured Questions May/June 2022

2 hours 15 minutes

You must answer on the enclosed answer booklet.

* 1 0 5 6 6 1 0 1 7 3 *

You will need: Answer booklet (enclosed)

INFORMATION
● The total mark for this paper is 90.
● The number of marks for each question or part question is shown in brackets [ ].

This document has 8 pages. Any blank pages are indicated.

DC (CJ/SG) 303865/3
© UCLES 2022 [Turn over
2

Section A

Read the source material carefully before answering Question 1.

Source material: Happiness

Bhutan fact file 2018

Population 0.8 m
GDP per head $3250
Government spending $450 m
Government tax revenue $380 m
World Happiness Index ranking 95th
Human Development Index ranking 134th

The United Nations has published a World Happiness Index every year since 2012. This index ranks
countries according to life expectancy, freedom, social support, trust, generosity and GDP per head.
New Zealand was ranked 8th in the World Happiness Index in 2019. The governments of both Bhutan
and New Zealand now consider a number of influences on the happiness of their populations.

While more than half of Bhutan’s labour force is employed in agriculture, most people in New Zealand
are employed in the tertiary sector. Working conditions, working hours, the type of work and pay vary
between the primary and tertiary sectors. Productivity is higher in all sectors in New Zealand than in
Bhutan. This is partly the result of higher investment in capital goods and education in New Zealand.
New Zealand also has a higher GDP per head. GDP per head ($) can influence net migration (number
of people) as shown for selected countries in 2017 in Fig. 1.1.

Bhutan
Cyprus
Kenya
Mozambique
New Zealand
Slovenia
–55 000 –35 000 –15 000 5000 25 000 45 000 65 000

Net migration (number of people) GDP per head ($)

Fig. 1.1 GDP per head ($) and net migration (number of people) of selected countries 2017

In its 2019 budget, the New Zealand government said it would measure its progress not by increases in
GDP but by increases in the quality of people’s lives. To achieve this, it announced increased spending
on some areas including mental health, child poverty and pollution. Some economists criticised this
approach. They argued that the best way the government could improve living standards is to reduce
income tax rates. This reduction could change government spending and the quantity of products that
people buy, including cars.

© UCLES 2022 0455/22/M/J/22

Tax revenue had increased in New Zealand in 2019, partly because of a rise in revenue from corporation
tax. It was, however, difficult to predict firms’ future profits. This was because of uncertainty about what
would happen to its GDP and its corporation tax rates.

Answer all parts to Question 1. Refer to the source material in your answers.

1 (a) Calculate Bhutan’s GDP in 2018. [1]

(b) Identify two indicators that are in both the World Happiness Index and the Human
Development Index. [2]

(d) Explain two reasons why someone may prefer to work in the tertiary sector rather than in the
primary sector. [4]

(e) Analyse how investment in capital goods and education can increase New Zealand’s
productivity. [4]

(f) Analyse the relationship between GDP per head and net migration. [5]

(g) Discuss whether or not enterprise is likely to have increased in New Zealand after 2019. [6]

(h) Discuss whether or not a cut in income tax rates will increase living standards. [6]

© UCLES 2022 0455/22/M/J/22 [Turn over

Section B

Answer any three questions.

Each question is introduced by stimulus material. In your answer you may refer to this material and/or
to other examples that you have studied.

2 There was a significant increase in the money supply in Angola in 2019. The National Bank of
Angola was concerned that this would keep inflation above 17% and harm Angola’s producers.
The Angolan government had concentrated on reducing unemployment, which had fallen from
10% in 2010 to 7% in 2019.

(a) Identify two forms of money. [2]

(b) Explain two functions a central bank performs for its government. [4]

(d) Discuss whether or not inflation will harm producers. [8]

3 In 2019, France produced inside its production possibility curve (PPC). France exports a wide
range of its products. It is the world’s top exporter of luxury perfume and the 7th largest exporter of
soap. Changes in technology affect the products people produce and buy. The French government
plans to upgrade its infrastructure for all households to have internet access.

(a) Define a production possibility curve. [2]

(b) Explain why demand for soap is more price-inelastic than demand for a luxury brand of
perfume. [4]

(c) Analyse, using a demand and supply diagram, how an increase in income will affect the
market for a luxury brand of perfume. [6]

(d) Discuss whether or not the public sector should be responsible for the supply of all internet
services. [8]

4 The South Korean government thinks that Japan is dumping steel. South Korean firms trade with,
and produce in, other countries. Some South Korean multinational companies (MNCs) claim to
reduce poverty in their host countries. In 2019, South Korean firms were affected by a depreciation
in South Korea’s foreign exchange rate. Some firms also experienced a shortage of workers,
which was influenced by the country’s very low birth rate.

(a) Define dumping. [2]

(b) Explain two reasons why a country’s foreign exchange rate may depreciate. [4]

(d) Discuss whether or not a very low birth rate would be a cause for concern for a government.
[8]

© UCLES 2022 0455/22/M/J/22

5 Nicaragua experienced a 4% decrease in GDP in 2019, although household spending rose.

One Nicaraguan product that increased in supply was bananas, which are a merit good. The
Nicaraguan government encouraged its banana farmers and its other producers to increase their
output. Increases in output can affect a firm’s average costs of production.

(a) Define supply. [2]

(b) Explain two ways a government could increase the consumption of merit goods. [4]

(d) Discuss whether or not a firm will benefit from an increase in its output. [8]

© UCLES 2022 0455/22/M/J/22

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Cambridge IGCSE™

ECONOMICS 0455/23
Paper 2 Structured Questions May/June 2022

2 hours 15 minutes

You must answer on the enclosed answer booklet.

* 8 9 8 1 9 8 0 4 0 9 *

You will need: Answer booklet (enclosed)

INFORMATION
● The total mark for this paper is 90.
● The number of marks for each question or part question is shown in brackets [ ].

This document has 8 pages. Any blank pages are indicated.

DC (NF) 303849/2
© UCLES 2022 [Turn over
2

Section A

Read the source material carefully before answering Question 1.

Source Material: The eSports industry and Malta

eSports fact file 2019

Global total revenue $1 billion
Revenue from Europe $300 million
Total number of viewers globally 454 million
Growth of viewers compared to 2018 15%

eSports is now recognised as a sports competition, just like playing other competitive sports such as
football and basketball. In eSports, participants compete through video games either as an individual or
as part of a team. eSports also attracts large audiences who watch these online competitions. eSports
is growing rapidly, both in terms of revenue generated and in the number of viewers. Demand has
increased because of increases in incomes and decreases in the price of the technology needed to
play or watch eSports. A change in social attitudes has also increased female participation in eSports.

The fast growth in this industry has attracted both private and public sector investment. Private sector
firms sponsor various eSports teams and also advertise their products during eSports competitions.
Public sector investment has come from the governments of China, Denmark, Malaysia and Malta,
mainly in development and training programmes for young eSports participants. The government of
Malta, a small island country, hopes to make Malta a main centre for eSports in Europe, to attract
visitors for eSports events. The aim is for the eSports industry to contribute 1% to Malta’s GDP, provide
3000 more jobs and improve the current account of its balance of payments.

Malta’s service sector has always been important and contributes approximately 90% of its GDP. Malta
is an attractive tourist destination due to its mild weather. The island is used as a location for many
movies and TV series, which also attracts visitors who want to see the filming locations. However, to
ensure growth is sustainable, the government sees the importance of economic diversification and
does not want the economy to overspecialise.

To achieve this, the labour force has to be adaptable and the government has to invest in education and
training. The government provides new scholarship schemes, organises work placements and brings
in professionals from other countries to help train Maltese students. However, there are concerns that
these measures may be too expensive and take too long to have a significant impact on the economy.

Female participation in the labour force is also encouraged. Table 1.1 shows the proportion of women
in the labour force (%) and GDP per head ($) of selected countries in 2019.

Table 1.1 Female labour force participation rate and GDP per head
of selected countries 2019

Country Female labour force participation rate GDP per head

(%) ($)
Bangladesh 36 2 070
France 50 42 640
Luxembourg 53 116 730
Malta 43 32 020
Saudi Arabia 23 22 530
Yemen 6 710

© UCLES 2022 0455/23/M/J/22

Answer all parts of Question 1. Refer to the source material in your answers.

1 (a) Calculate Europe’s percentage contribution to the global total eSports revenue in 2019. [1]

(b) Identify two conditions of demand for eSports. [2]

(d) Explain two differences between private sector investment and public sector investment. [4]

(e) Analyse how the development of eSports in Malta can help the government achieve its
macroeconomic aims. [4]

(f) Analyse the relationship between GDP per head and the proportion of females in the labour
force. [5]

(g) Discuss whether or not specialisation at a national level is harmful to an economy. [6]

(h) Discuss whether or not government investment in education and training will help the Maltese
economy. [6]

© UCLES 2022 0455/23/M/J/22 [Turn over

Section B

Answer any three questions.

Each question is introduced by stimulus material. In your answer you may refer to this material and/or
to other examples that you have studied.

2 Voralberg, a region in Austria, has the highest income and best healthcare of any region in Austria.
It benefits from its short distance to Germany and Switzerland, and from the free trade between
these countries. However, Voralberg hosts only a small number of foreign multinational companies
(MNCs) and its inflation is higher than most areas in Europe.

(a) Define free trade. [2]

(b) Explain two possible causes of better healthcare. [4]

(d) Discuss whether or not inflation is always a disadvantage to an economy. [8]

3 Leading jewellery firms in Qatar and Ukraine have asked their governments to remove trade
protection between them to increase trade in jewellery. The jewellery firms of Qatar and Ukraine
produce unique products which are improving in quality. They believe that increased trade between
the two countries will enable them to exploit internal economies of scale in jewellery production.

(a) Identify two internal economies of scale. [2]

(b) Explain two methods of protection in international trade. [4]

(d) Discuss whether or not protection in international trade benefits an economy. [8]

4 In 1982, Nauru had the world’s highest GDP per head. It had a large primary sector and exported
phosphate, a natural fertiliser. However, this natural resource did not last long. Nauru is now facing
market failure due to pollution and unhealthy food imports. Despite having more imports of goods
than exports of goods, it still records a surplus on the current account of its balance of payments.

(a) Define GDP per head. [2]

(b) Explain how a country with more imports of goods than exports of goods can still record a
surplus on the current account of its balance of payments. [4]

(c) Analyse the causes of market failure. [6]

(d) Discuss whether or not having a large primary sector is a disadvantage to an economy. [8]

© UCLES 2022 0455/23/M/J/22

5 More government spending creates opportunity costs. This was one of the problems that the
president of France faced in 2017. Since he came to power, he has focused on using supply-side
policy measures, rather than monetary policy. Trade union membership has reduced in France in
recent years.

(a) Define monetary policy. [2]

(b) Explain, using an example, the influence of opportunity cost on government decision-making.
[4]

(d) Discuss whether or not supply-side policy measures always promote economic growth. [8]

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© UCLES 2022 0455/23/M/J/22

Cambridge IGCSE™

ECONOMICS 0455/21
Paper 2 Structured Questions October/November 2022

2 hours 15 minutes

You must answer on the enclosed answer booklet.

* 1 5 0 3 7 1 1 2 8 2 *

You will need: Answer booklet (enclosed)

INFORMATION
● The total mark for this paper is 90.
● The number of marks for each question or part question is shown in brackets [ ].

This document has 8 pages. Any blank pages are indicated.

DC (NF) 303866/2
© UCLES 2022 [Turn over
2

Section A

Read the source material carefully before answering Question 1.

Source material: Mauritius’s international reach

Mauritius fact file 2019

Tertiary sector as a % of GDP 76%
Total GDP $14.2 billion
Population 1.26 million

Mauritius is an island nation in the Indian Ocean. The economy of Mauritius has grown since it
changed from an economy based on the primary sector to one based on the tertiary sector. The growth
of the economy not only increased income per head but also improved healthcare in Mauritius. Life
expectancy has increased and the infant mortality rate (number of infant deaths per thousand births)
has fallen significantly.

Mauritius is known for many attractions, including its beautiful beaches, and more than a million
tourists visit each year. Tourists from most countries only need their passport to visit Mauritius as a
visa is not required. The tourism industry not only creates many jobs, it also raises tax revenue for
the government. The tax revenue from the tourism industry is used to fund development projects that
benefit the entire population, not just those working in tourism. There are also more than 32 000 foreign
firms based in Mauritius. Firms set up in Mauritius due to its fast growth and political stability, as well as
having few regulations to set up and run a firm.

The government tries to attract more investment by providing good infrastructure. The government
spent more than $1 billion on infrastructure development in 2019. It upgraded the international airport
on the island, the seaport, and public transportation around the island. This could reduce the cost of
doing business in Mauritius and increase the size of a firm’s market. Critics are worried, however,
that the money has been used to fund projects which have not benefited the economy as much as
spending on education or healthcare would have.

The government is also looking for new sources of economic growth, including increasing international
trade and foreign investment. More international trade is seen as key to economic growth. Table 1.1
shows the percentage of international trade to GDP and the GDP per head in selected countries in
2019.

Table 1.1 Percentage (%) of international trade to GDP and GDP per head ($)
in selected countries 2019

Country Percentage (%) of GDP per head ($)

international trade to GDP
India 40 2 104
Kenya 33 1 817
Luxembourg 382 114 704
Mauritius 93 11 225
Qatar 87 64 782

© UCLES 2022 0455/21/O/N/22

The Mauritian government encourages both inward and outward investment. By country, Mauritius is
one of the largest foreign investors in India. Mauritian firms plan to invest in the new Special Economic
Zones (SEZs) being set up in Kenya. Outward investment enables Mauritian firms to enter new markets
in other countries, to import at a lower cost and increase access to foreign technology. However, the
risk is that profit earned abroad may not be reinvested back to the domestic economy. Any changes in
the international economy may also affect potential profits.

Answer all parts of Question 1. Refer to the source material in your answers.

1 (a) Calculate the total value of the tertiary sector in Mauritius in 2019. [1]

(b) Explain the meaning of a change from an economy based on the primary sector to one based
on the tertiary sector. [2]

(c) Identify two indicators of improving healthcare in Mauritius. [2]

(d) Explain two reasons why millions of tourists visit Mauritius each year. [4]

(e) Explain two advantages of setting up a firm in Mauritius. [4]

(f) Analyse the relationship between the percentage of international trade to GDP and GDP per
head. [5]

(g) Discuss whether or not outward investment might benefit a Mauritian firm. [6]

(h) Discuss whether or not government infrastructure spending benefits the Mauritian economy.
[6]

© UCLES 2022 0455/21/O/N/22 [Turn over

Section B

Answer any three questions.

Each question is introduced by stimulus material. In your answer you may refer to this material and/or
to other examples that you have studied.

2 Medan is the third largest city in Indonesia by population. It is sometimes known as the city of a
million shop-houses as many people start small firms at the street level of their homes. This has
led to an increase in the market supply of industries such as cafes and clothes shops. Also, due
to the growth in demand for food delivery, the unemployment rate has fallen. However, mobility of
labour is limited both within Medan and within Indonesia.

(a) Identify the difference between individual supply and market supply. [2]

(b) Explain two influences on the mobility of labour. [4]

(d) Discuss whether or not a reduction in the unemployment rate benefits an economy. [8]

3 Jordan has a fixed foreign exchange rate with the US dollar. The monetary policy of Jordan,
therefore, follows the monetary policy of the US very closely. Due to low confidence in the global
economy in 2019, central banks around the world, including Jordan and the US, cut interest
rates to stimulate growth. However, this may have conflicted with the macroeconomic aim of low
inflation.

(a) Define inflation. [2]

(b) Explain the effects of low confidence on both spending and borrowing. [4]

(d) Discuss whether or not a country will benefit from having a fixed foreign exchange rate
system. [8]

4 Some firms have social welfare as their main objective. Globally, the number of this type of firm
is increasing. Consumers are also starting to change their spending patterns by moving towards
environmentally friendly products such as solar energy. Environmentally unfriendly firms are less
able to make profits and some of these firms must merge to survive.

(a) Identify two examples of social welfare objectives of firms. [2]

(b) Explain two types of merger. [4]

(c) Analyse, using a demand and supply diagram, the effects on the solar energy industry of the
change in spending patterns towards environmentally friendly products. [6]

(d) Discuss whether or not a merger can help a firm survive. [8]

© UCLES 2022 0455/21/O/N/22

5 Bulgaria is part of the European Union (EU), but it has much lower corporation tax rates than
other EU members. However, regulation by the Bulgarian government has discouraged foreign
investment into Bulgaria. In addition, Bulgaria’s economic growth rate has decreased in recent
years, due in part to a steady fall in its quantity of labour.

(a) Define regulation. [2]

(b) Explain two causes of a fall in the quantity of labour in a country. [4]

(c) Analyse how differences in the rates of corporation tax between countries may affect
multinational companies (MNCs). [6]

(d) Discuss whether or not a decrease in a country’s economic growth rate will harm its economy.
[8]

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Cambridge IGCSE™

ECONOMICS 0455/22
Paper 2 Structured Questions October/November 2022

2 hours 15 minutes

You must answer on the enclosed answer booklet.

* 3 4 4 9 5 4 5 7 4 1 *

You will need: Answer booklet (enclosed)

INFORMATION
● The total mark for this paper is 90.
● The number of marks for each question or part question is shown in brackets [ ].

This document has 8 pages. Any blank pages are indicated.

DC (LK/SG) 303845/1
© UCLES 2022 [Turn over
2

Section A

Read the source material carefully before answering Question 1.

Source material: Bank mergers

Nigeria and US fact file Nigeria 2019 US 2019

Change in GDP 2.3% 4.9%
Inflation rate 11.5% 1.8%
US dollar to Nigerian naira
1 dollar = 400 naira
exchange rate

In 2019, there was a merger between three Nigerian commercial banks to form Nigeria’s largest
commercial bank. In 2019, two US commercial banks merged to form the US’s 6th largest commercial
bank. In the US, the three largest banks controlled 32% of the market. In the US and Nigeria, large
banks have opened more branches, carried out advertising campaigns and improved online banking.

Bank mergers can result in some bank employees losing their jobs. Unemployment did rise in Nigeria
in 2019. This is likely to have affected the government’s budget as both government tax revenue and
government spending will have changed. Most commercial bank workers are well-educated. The
number of years of education people receive can affect a country’s birth rate. Fig. 1.1 shows average
years of schooling and the birth rate in selected countries in 2019.

Germany
16
US
14
Average years
12
of schooling Argentina
10
8 Nigeria
6
Eritrea
4
Chad
2
0
0 10 20 30 40 50
Birth rate

Fig. 1.1 Average years of schooling and birth rate in selected countries 2019

Some households in both Nigeria and the US, who spend more than they earn, borrow from commercial
banks. Some children in Nigeria, in low-income households, do not have enough to eat due to the high
price of food. A government subsidy to farmers could be used to help low-income Nigerian households.
The subsidy could also help to reduce the deficit on the current account of its balance of payments.
This will depend on Nigeria’s inflation rate compared with other countries and incomes at home and
abroad.

In the US, nearly 35% of children are overweight. One cause of this is the consumption of high-sugar
food and drinks. The US government could impose a minimum price on such products, including
chocolate. A minimum price could move the market closer to where social benefit equals social cost.
However, some consumers think it would be unfair and some firms think it would reduce profits. A
minimum price may also impose a cost on the government and its success would be influenced by how
high the minimum price is set.

© UCLES 2022 0455/22/O/N/22

Answer all parts of Question 1. Refer to the source material in your answers.

1 (a) Calculate how many dollars 6400 Nigerian naira would have bought in 2019. [1]

(b) Identify two ways a bank could increase demand for its services. [2]

(d) Explain two reasons why a large US commercial bank may charge a high price for its
services. [4]

(e) Analyse how an increase in unemployment may affect the Nigerian government’s budget. [4]

(f) Analyse the relationship between countries’ average years of schooling and birth rates. [5]

(g) Discuss whether or not a subsidy, given to farmers by the Nigerian government, would reduce
the deficit on the current account of its balance of payments. [6]

(h) Discuss whether or not the US government should impose a minimum price on chocolate. [6]

© UCLES 2022 0455/22/O/N/22 [Turn over

Section B

Answer any three questions.

Each question is introduced by stimulus material. In your answer you may refer to this material and/or
to other examples you have studied.

2 The economic problem results in choices and opportunity cost. People have to decide what job to
do and where to live. In recent years Australia has recruited teachers from a number of countries
including Canada, the UK and the US. Most of these teachers specialise in a single subject.

(a) Define opportunity cost. [2]

(b) Explain the economic problem and why it is always likely to exist. [4]

(d) Discuss whether or not a teacher would benefit from specialisation. [8]

3 In 2019, Russia had an unemployment rate of 4.6%. Russia experienced full employment in the
past. Its government wants unemployment to be lower. In 2018, the Russian government cut its
spending which may have increased poverty. In both 2018 and 2019, the government did not
change its income tax rate. Russia operates a proportional tax rate system.

(a) Define full employment. [2]

(b) Explain the difference between a proportional income tax system and a progressive income
tax system. [4]

(d) Discuss whether or not a fall in a country’s unemployment rate always benefits workers. [8]

4 Advances in technology have changed how trees (wood) are cut down, transported and used in
the manufacture of furniture, such as tables. Wood is in inelastic supply. Wood can be supplied in
all economic systems. However, public goods are not supplied in a market economic system.

(a) Define inelastic supply. [2]

(b) Explain why public goods would not be supplied in a market economic system. [4]

(c) Analyse, using a demand and supply diagram, the effect on the market for furniture of an
increase in the price of wood. [6]

(d) Discuss whether or not advances in technology will benefit a country’s population. [8]

© UCLES 2022 0455/22/O/N/22

5 While 15% of US exports go to Mexico, 80% of Mexico’s exports go to the US. In 2019, the US
government imposed some methods of protection to reduce imports from Mexico. This US action
caused a fall in Mexico’s foreign exchange rate. Despite a rise in its inflation rate, Mexico’s central
bank reduced the rate of interest from 7.75% at the end of 2019 to 6.5% in March 2020.

(a) Identify two methods of protection. [2]

(b) Explain two reasons why a government may want to reduce imports. [4]

(d) Discuss whether or not a decrease in the rate of interest will increase a country’s GDP. [8]

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Cambridge IGCSE™

ECONOMICS 0455/23
Paper 2 Structured Questions October/November 2022

2 hours 15 minutes

You must answer on the enclosed answer booklet.

* 0 1 2 8 4 0 7 4 9 3 *

You will need: Answer booklet (enclosed)

INFORMATION
● The total mark for this paper is 90.
● The number of marks for each question or part question is shown in brackets [ ].

This document has 8 pages. Any blank pages are indicated.

DC (NF) 216803/1
© UCLES 2022 [Turn over
2

Section A

Read the source material carefully before answering Question 1.

Source material: Changes in Ecuador’s economy

Ecuador Fact file 2019 2014–2016

Population 18m Change in price in –50%
Ecuador’s oil
Number of Ecuadoreans 3m Change in supply of –8%
living and working abroad Ecuador’s oil

Oil makes up one third of Ecuador’s exports. Ecuador has, however, decided to produce less oil and
more of other goods and services. This decision has affected how products are made in Ecuador. For
example luxury textile production, such as luxury scarves and jumpers, uses fewer capital goods than
oil production. Tourism relies on natural resources including sunshine and beaches.

One reason Ecuador’s government has encouraged less reliance on oil, is the large changes that often
occur in the oil market. Between 2014 and 2016, demand for Ecuador’s exports fell which caused
a significant reduction in export revenue. This reduction, combined with a decrease in government
spending, caused the country’s output to decline.

Between 2016 and 2019, there was some improvement in Ecuador’s economy. Incomes and household
spending increased and more cars were purchased. Table 1.1 shows the GDP per head ($) and car
ownership (per 1000 people) in selected countries in 2019.

Table 1.1 GDP per head ($) and car ownership (per 1000 people) in selected countries 2019

Country GDP per head Car ownership

($) (per 1000 people)
Ecuador 6 200 160
New Zealand 44 000 865
Senegal 1 600 50
Spain 32 000 650
Switzerland 83 000 720
Uruguay 18 000 300

Ecuador’s government borrowed from China to spend on building more roads. The construction of
these roads increased employment and was expected to influence transport costs in the long run.

Between 2016 and 2019, Ecuador’s textile industry benefited from the improvement in the road
network. Despite strong competition from foreign textile firms, Ecuador’s textile firms increased the
scale of their production. Wages paid in the textile industry did not rise significantly. A very small wage
increase can affect trade union activity and emigration.

Some of Ecuador’s workers emigrate to find jobs in other countries, particularly Italy, Spain and the
US. These workers have a range of skills and they work in a variety of jobs abroad, some of which
provide training. Many, but not all, workers send money home to their families.

© UCLES 2022 0455/23/O/N/22

Answer all parts of Question 1. Refer to the source material in your answers.

1 (a) Calculate the price elasticity of supply of Ecuador’s oil. [1]

(b) Identify two key resource allocation questions. [2]

(c) State why sunshine has no opportunity cost. [2]

(d) Explain two reasons why Ecuador experienced a recession between 2014 and 2016. [4]

(e) Analyse how building more roads can increase a country’s economic growth rate. [4]

(f) Analyse the relationship between GDP per head and car ownership. [5]

(g) Discuss whether or not the profits of Ecuador’s textile firms are likely to have increased
between 2016 and 2019. [6]

(h) Discuss whether or not Ecuador benefits from the emigration of some of its workers. [6]

© UCLES 2022 0455/23/O/N/22 [Turn over

Section B

Answer any three questions.

Each question is introduced by stimulus material. In your answer you may refer to this material and/or
to other examples you have studied.

2 Washington State is the state which grows the most apples in the US. In 2019, apple production
increased in Washington State but the market was in disequilibrium. Apple farming is a labour-
intensive industry because apples are picked by hand. The market for apples in the US is
competitive.

(a) Define market disequilibrium. [2]

(b) Explain opportunity cost and how it can influence a farmer’s decision to grow apples. [4]

(c) Analyse how labour-intensive production can benefit an economy. [6]

(d) Discuss whether or not consumers benefit from a competitive market. [8]

3 Romania’s indirect tax rate was 19% between 2017 and 2019. There is a high proportion of
foreign multinational companies (MNCs), especially US MNCs, in Romania. MNCs have helped
to increase productivity in Romania and lower its unemployment rate. There are also benefits of
MNCs to their home countries.

(a) Define, with an example, an indirect tax. [2]

(b) Explain two benefits of MNCs to their home countries. [4]

(c) Analyse how an increase in productivity can affect unemployment. [6]

(d) Discuss whether or not a decrease in a country’s unemployment rate will reduce poverty. [8]

4 Poland is the world’s top exporter of toothpaste, a product that is in inelastic demand. In 2019,
some Polish firms producing toothpaste considered a horizontal merger. Also in 2019, the wages of
dentists increased globally. This increase was particularly high in the UK where dentists received,
on average, a 25% wage rise.

(a) Identify two determinants of price elasticity of demand. [2]

(b) Explain two advantages to a firm of a horizontal merger. [4]

(c) Analyse, using a demand and supply diagram, how the market for toothpaste would be
affected by an increase in population. [6]

(d) Discuss whether or not an increase in the wages of dentists will increase the number of
dentists employed. [8]

© UCLES 2022 0455/23/O/N/22

5 Palau is a small island country in the Pacific Ocean. It has received considerable financial support
from the US. Living standards are thought to be lower in Palau than in the US. Palau imposes some
of the highest tariffs in the world. These trade tariffs affect Palau’s current account of its balance of
payments. In 2019, commercial bank lending to firms and households in Palau increased.

(a) Identify two components of the current account of the balance of payments. [2]

(b) Explain two reasons for differences in living standards between countries. [4]

(d) Discuss whether or not an increase in commercial bank lending will increase economic
growth. [8]

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© UCLES 2022 0455/23/O/N/22

Cambridge IGCSE™

ECONOMICS 0455/22
Paper 2 Structured Questions February/March 2023

2 hours 15 minutes

You must answer on the enclosed answer booklet.

* 9 7 6 3 3 1 3 5 3 7 *

You will need: Answer booklet (enclosed)

INFORMATION
● The total mark for this paper is 90.
● The number of marks for each question or part question is shown in brackets [ ].

This document has 8 pages. Any blank pages are indicated.

DC (EF) 313634/2
© UCLES 2023 [Turn over
2

Section A

Read the source material carefully before answering Question 1.

Source material: Changes in US macroeconomic performance and policies

US fact file 2020

Current account of the balance of payments –$470 bn
Imports of goods and services $2 800 bn
Imports from China as % of total imports 20%
Economic growth rate –2.8%
Inflation rate 1.4%

Between 2009 and 2019, US real GDP increased every year. This was the result of, among other
causes, low interest rates, land reclamation and an increase in the labour force. The higher US
output brought a number of benefits but some workers lost their jobs. This was because while some
industries expanded, others closed down. Income also became more unevenly distributed and pollution
increased.

US exports and imports rose over this period. The growth of trade with China, a major trading partner
of the US, was affected later in the period by increases in US tariffs on some Chinese imports. These
increases were expected to change the US current account balance, output and tax revenue.

The US exports a range of products to China, including ice cream. China is the world’s largest
consumer of ice cream, buying a third of all ice cream consumed. Chinese consumers sometimes buy
chocolate to eat with ice cream. In 2019, the price of chocolate increased.

In 2020, US macroeconomic performance changed. The country’s price level rose more slowly,
largely due to a decrease in consumer expenditure and a reduction in workers’ bargaining power. The
country’s real GDP fell and unemployment rose. These changes influenced US macroeconomic policy.
US government spending rose significantly as shown in Table 1.1.

Table 1.1 US Government spending and unemployment rate 2015–2020

Year Government spending ($ billion) Unemployment (%)

2015 3 700 5.3
2016 3 900 4.9
2017 4 000 4.4
2018 4 100 3.9
2019 4 400 3.7
2020 6 600 6.7

The US central bank, the Federal Reserve, announced in September 2010 that it would allow the
inflation rate to rise and would not increase the interest rate. In the past, central banks have aimed to
keep the inflation rate low because of the effects that inflation can have on, for example, investment,
exports, the distribution of income and tax revenue. The Federal Reserve stated that it wanted to raise
economic growth which can increase income per head, employment and tax revenue.

© UCLES 2023 0455/22/F/M/23

Answer all parts of Question 1. Refer to the source material in your answers.

1 (a) Calculate the value of US imports from China in 2020. [1]

(b) Identify two causes of the increase in the quantity of US factors of production. [2]

(d) Explain two reasons why the US inflation rate fell in 2020. [4]

(e) Draw a demand and supply diagram to show the effect of an increase in the price of a
complement on the market for ice cream. [4]

(f) Analyse the relationship between government spending and unemployment. [5]

(g) Discuss whether or not a central bank should aim for a low inflation rate. [6]

(h) Discuss whether or not economic growth benefits everyone in the US. [6]

© UCLES 2023 0455/22/F/M/23 [Turn over

Section B

Answer any three questions.

Each question is introduced by stimulus material. In your answer you may refer to this material and/or
to other examples that you have studied.

2 Vietnam has a high number of female entrepreneurs. Some of their firms have grown and now
compete with foreign multinational companies (MNCs) and public sector firms. The Vietnamese
government encourages MNCs to locate in Vietnam as a host country. It also intervenes in the
economy to encourage the consumption of merit goods.

(a) Identify two reasons why people become entrepreneurs. [2]

(b) Explain two benefits that an MNC can bring to its host country. [4]

(d) Discuss whether or not private sector firms are likely to charge lower prices than public sector
firms. [8]

3 In 2019, India became the world’s largest producer of sugar. Sugar cane is grown in the country
by a large number of mainly low‑income farmers. They sell sugar cane to mills which process the
sugar cane into sugar. Processing the sugar cane is more capital‑intensive than growing it. The
Indian government sets a minimum price for sugar cane and subsidises the export of sugar.

(a) Define a minimum price. [2]

(b) Explain two advantages of capital‑intensive production. [4]

(d) Discuss whether or not a government subsidy on the export of sugar will help it achieve its
macroeconomic aims. [8]

4 Safiye Ali became the first female doctor in Turkey in 1923. By 2020, 40% of Turkish doctors were
women. Over this period, labour productivity increased. Turkey also experienced advances in
technology, a change in the current account balance on its balance of payments and a significant
increase in the size of its population.

(a) Identify two causes of an increase in labour productivity. [2]

(b) Explain two reasons why someone may choose to become a doctor. [4]

(d) Discuss whether or not a country with a high population growth rate is likely to experience a
high economic growth rate. [8]

© UCLES 2023 0455/22/F/M/23

5 Serbia is the world’s second largest producer of raspberries, a product with elastic demand.
Consumers experience the economic problem when buying raspberries. Few raspberry farm
workers are members of trade unions. Membership of trade unions in Serbia had fallen to 20% of
all workers by 2020. In that year, Serbia had more state pensioners than workers.

(a) Identify two determinants of price elasticity of demand. [2]

(b) Explain how the economic problem results in consumers having to make choices. [4]

(d) Discuss whether or not a government should reduce the amount of money it gives to each
state pensioner. [8]

© UCLES 2023 0455/22/F/M/23

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© UCLES 2023 0455/22/F/M/23

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Permission to reproduce items where third‑party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer‑related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

© UCLES 2023 0455/22/F/M/23

Cambridge IGCSE™

ECONOMICS 0455/21
Paper 2 Structured Questions May/June 2023

2 hours 15 minutes

You must answer on the enclosed answer booklet.

* 1 5 3 5 1 8 5 8 3 9 *

You will need: Answer booklet (enclosed)

INFORMATION
● The total mark for this paper is 90.
● The number of marks for each question or part question is shown in brackets [ ].

This document has 8 pages. Any blank pages are indicated.

DC (EF) 313631/4
© UCLES 2023 [Turn over
2

Section A

Read the source material carefully before answering Question 1.

Source material: Is there a future for Australian coal?

Australia fact file 2021 2026 (forecast)

Population 25.8 m 27.1 m
Labour force 14.0 m 14.8 m
Number unemployed 0.56 m 0.62 m
GDP $1 618 bn $2 017 bn
Government budget balance –3.2% of GDP

Australia is a major producer of coal. Most coal is used to produce electricity. In this process, carbon
dioxide is emitted. Global demand for coal has declined in recent years as countries have tried to
reduce pollution. There has been a switch to, for example, gas, offshore wind and solar power.

Coal is mined in each of Australia’s six states but most is mined in Queensland and in New South
Wales. In Queensland, some of the firms are very large. These firms employ both low-paid, unskilled
workers and high-paid, specialist mining engineers, site managers and accountants. The firms use the
latest excavators, mining drills, crushing equipment, earth movers and drones to detect maintenance
issues.

Coal can be stored to meet changes in market conditions but storage costs can be high. It can also
take years to construct a new coal mine. Table 1.1 shows the output and consumption of the seven
largest producers in 2020.

Table 1.1 The output and consumption of the seven largest producing countries 2020

Country Output of coal Consumption of coal

(million tonnes) (million tonnes)
China 3 640 4 215
India 765 939
US 671 660
Australia 515 121
Indonesia 510 142
Russia 419 234
South Africa 250 186

Global coal production has fallen in recent years with most countries switching to renewable sources of
energy. However, there are some countries where coal production is set to increase. There are plans
in both Australia and India, for example, to open new coal mines. The Indonesian government sets a
maximum price on coal to encourage the country’s power stations to use it.

The Australian coal industry contributes to its government’s tax revenue. There are, however, other
influences on Australia’s government’s budget balance including changes in tax rates and state support
for some of the country’s industries.

Answer all parts of Question 1. Refer to the source material in your answers.

1 (a) Calculate Australia’s unemployment rate in 2021. [1]

(b) Identify two substitutes for coal. [2]

(d) Explain two influences on the price elasticity of supply of coal. [4]

(e) Draw a demand and supply diagram to show how setting a maximum price below the
equilibrium price will affect a market. [4]

(f) Analyse whether large coal-producing countries are likely to be net exporters of coal. [5]

(g) Discuss whether or not an increase in the size of its coal industry will benefit the Australian
economy. [6]

(h) Discuss whether or not Australia is likely to have a budget deficit in 2026. [6]

Section B

Answer any three questions.

Each question is introduced by stimulus material. In your answer you may refer to this material and/or
to other examples that you have studied.

2 Living standards, including education, have improved for most people in South Africa in recent
years. Most households have more money and the government has more tax revenue. There is,
however, considerable income inequality. In 2020, 36% of the population were living in poverty. An
increase in unemployment benefit payments might reduce this poverty.

(a) Identify two functions of money. [2]

(b) Explain how improved education may affect the demand for cigarettes and for fresh fruit. [4]

(c) Analyse the causes of an increase in a government’s tax revenue. [6]

(d) Discuss whether or not an increase in unemployment benefit payments would reduce poverty.
[8]

3 Germany’s death rate is higher than some other countries, including Sweden, Cuba and the
Maldives. Germany’s labour force increased in size between 2011 and 2021 and has become
even more productive. The country has also experienced low inflation and a growing surplus on
the current account of its balance of payments.

(a) Identify two reasons why death rates may vary between countries. [2]

(b) Explain two causes of an increase in the size of a country’s labour force. [4]

(c) Analyse how an increase in labour productivity in a country can increase a surplus on the
current account of its balance of payments. [6]

(d) Discuss why some countries may experience lower inflation in the future and some may not.
[8]

4 Many people from the Philippines work in another country, often in industries that provide merit
goods and public goods. In 2020, the Philippine government raised more tax revenue. Some was
spent on policy measures to increase life expectancy and some on policy measures to reduce
unemployment. The country’s unemployment rate was also affected by a rise in the country’s
foreign exchange rate.

(a) Identify two influences on which country a person decides to work in. [2]

(b) Explain, with examples, the difference between a merit good and a public good. [4]

(d) Discuss whether or not a rise in a country’s foreign exchange rate would benefit its economy.
[8]

5 In Greece, rich households spend more than the average household. The amount of spending
in an economy influences whether its production point is on or inside its production possibility
curve (PPC). In 2020, household spending in Greece fell. This affected some firms’ plans to
merge. It also increased unemployment. More than half of those unemployed in Greece had been
unemployed for more than a year.

(a) Identify two reasons why rich households spend more than the average household. [2]

(b) Explain the significance of a production point inside a PPC and a production point on its PPC.
[4]

(d) Discuss whether or not a government should encourage firms to merge. [8]

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Cambridge IGCSE™

ECONOMICS 0455/22
Paper 2 Structured Questions May/June 2023

2 hours 15 minutes

You must answer on the enclosed answer booklet.

* 3 7 2 0 1 7 3 3 8 9 *

You will need: Answer booklet (enclosed)

INFORMATION
● The total mark for this paper is 90.
● The number of marks for each question or part question is shown in brackets [ ].

This document has 8 pages. Any blank pages are indicated.

Section A

Read the source material carefully before answering Question 1.

Source material: How will oil change Guyana?

Guyana fact file 2020

Population 790 000
Estimated optimum population 1 100 000
Proportion of population living in poverty 35%
Economic growth rate 26%
Unemployment rate 11%
Current account of the balance of payments –$237m

Guyana was the fastest growing economy in the world in 2020. Sugar, gold and timber have accounted
for a relatively high proportion of the country’s output and exports for some time. In 2020, the sugar
industry was hit by bad weather and falling global demand. In contrast, the output of gold and timber
increased.

The main reason why Guyana’s real GDP increased so rapidly was the increase in oil production.
Oil was discovered offshore by a foreign multinational company (MNC) in 2015 and the MNC started
production in 2019. It is predicted that Guyana will become the world’s largest oil producer per head
by 2025.

The Guyanese government is planning to use some of the tax revenue it will raise from oil to spend on
education and improvements to the country’s infrastructure. Planned projects include new railway lines
and stations. A more extensive and cheaper rail service may enable more people to work further from
home and may influence the market for substitutes, such as car transport. The Guyanese government
is also planning to spend some of the tax revenue on improving the country’s access to the internet.
Table 1.1 shows GDP per head and internet access in seven countries in 2020.

Table 1.1 GDP per head and internet access in selected countries in 2020

Population with
Country GDP per head ($)
internet access (%)
Brazil 8717 72
Eritrea 643 2
France 40 494 83
Guyana 6160 39
Iceland 66 945 99
Morocco 3204 64
Zambia 1305 29

Guyana has experienced a slow growth in its population size in recent years. In 2020, its birth rate
was 16.5, its death rate was 6.8 and its net migration rate was –7.7. With increases in oil production,
emigration may decline and the country may start to experience net immigration. A higher population
may affect Guyana in a number of ways including changing the size of its labour force and affecting the
environment.
© UCLES 2023 0455/22/M/J/23
3

Answer all parts of Question 1. Refer to the source material in your answers.

1 (a) Calculate the number of people who were living in poverty in Guyana in 2020. [1]

(b) Identify two causes of the decrease in the output of sugar in 2020. [2]

(c) Explain how economic growth is measured. [2]

(d) Explain two reasons why labour mobility may increase in Guyana in the future. [4]

(e) Draw a demand and supply diagram to show the effect of a decrease in the price of rail
transport on the market for car transport. [4]

(f) Analyse the relationship between GDP per head and internet access. [5]

(g) Discuss whether or not the discovery of oil is likely to increase living standards in Guyana. [6]

(h) Discuss whether or not Guyana would benefit from an increase in the size of its population.
[6]

Section B

Answer any three questions.

Each question is introduced by stimulus material. In your answer you may refer to this material and/or
to other examples that you have studied.

2 In 2020, the largest Thai commercial bank merged with a smaller commercial Thai bank. It was
expected that the merger would affect the price charged for bank services and the amount that
would be lent. Thai commercial banks operate in the private sector. A growing private sector can
move an economy towards a market economic system.

(a) Identify two influences, other than price, on a customer’s choice of bank. [2]

(b) Explain two reasons why a merger may result in higher prices for consumers. [4]

(d) Discuss whether or not a market economy allocates resources in the best possible way. [8]

3 Canada’s private sector firms have a number of different objectives. The quantity and quality of land
used by these firms, including farms, has increased. There has also been increased investment
with the firms buying more capital goods. In 2021, the Canadian government encouraged higher
investment and aimed to prevent a rise in unemployment.

(a) Identify two objectives of private sector firms. [2]

(b) Explain one reason why the quantity of land may increase and one reason why the quality of
land may increase. [4]

(c) Analyse how an increase in investment may affect unemployment. [6]

(d) Discuss whether or not a government should try to prevent a rise in unemployment. [8]

4 In 2020, Australia had a high national minimum wage (NMW). The NMW is received by some
people who work on Australian dairy farms. Australia produces milk and soft drinks. Milk is
purchased by some people as an alternative to soft drinks. Some dairy farms and some small
firms went out of business in 2020. The year saw an increase in the value of the country’s floating
foreign exchange rate.

(a) Identify two reasons why a government may set an NMW. [2]

(b) Explain two causes of an increase in the value of a country’s floating foreign exchange rate.
[4]

(c) Analyse how an increase in the price of milk may affect the revenue earned by milk producers
and soft drinks producers. [6]

(d) Discuss whether or not small firms are more likely to go out of business than large firms. [8]

5 In 2019, China’s economic growth rate was 6.1% and Chinese households increased their
spending. More Chinese people attended sports events and the earnings of top sportspeople
increased. China exported more despite a rise in tariffs on some of its products. For example, the
US imposed higher tariffs on the imports of Chinese tea and coffee.

(a) Identify the opportunity cost of households spending their income and the opportunity cost of
Chinese firms exporting goods and services. [2]

(b) Explain two reasons why some top sportspeople have high earnings. [4]

(c) Analyse the reasons for imposing tariffs on imports. [6]

(d) Discuss whether or not a country with a high economic growth rate will have a deficit on the
current account of its balance of payments. [8]

BLANK PAGE

Cambridge IGCSE™

ECONOMICS 0455/23
Paper 2 Structured Questions May/June 2023

2 hours 15 minutes

You must answer on the enclosed answer booklet.

* 6 3 0 6 5 8 3 8 3 4 *

You will need: Answer booklet (enclosed)

INFORMATION
● The total mark for this paper is 90.
● The number of marks for each question or part question is shown in brackets [ ].

This document has 8 pages. Any blank pages are indicated.

Section A

Read the source material carefully before answering Question 1.

Source material: New Zealand’s aim for carbon‑neutrality

New Zealand fact file 2020

Total GDP $195bn
Total GDP as a percentage of world GDP 0.16%
Population 5m

New Zealand is a relatively small economy that intends to be carbon‑neutral by the year 2050.
Carbon‑neutrality is when a country removes the same amount of carbon dioxide from the environment
as it emits or simply eliminating carbon dioxide emissions altogether.

There are now various plans in place to reduce external costs in industries such as the milk and car
industries. Both industries are major contributors to air pollution and the milk industry damages the
environment where many wild animals live. The government intends to end imports of petrol‑powered
cars by 2032 and also limit the number of cows that each farmer can keep. However, good substitutes
will need to be found to achieve these targets. Consumers will want a cheaper substitute for
petrol‑powered cars and farmers will need a different source of revenue than cows.

The success of the government plans will be important for New Zealand’s macroeconomic performance.
New Zealand exporters rely on a clean and green brand image, and this will help economic growth and
reduce the deficit on the current account of the balance of payments. However, not all firms will benefit
from government plans to achieve carbon‑neutrality and inflation rates may also increase.

A switch to a carbon‑neutral economy could result in increased unemployment due to significant job
losses in the coal, oil and gas industries. This could lead to increased poverty in certain communities
and large losses in the firms that serve these communities. However, these changes may be temporary
and an economy with a high mobility of factors of production could avoid such problems.

The good news is that New Zealand already has a low level of carbon dioxide emissions. However,
not all countries can easily take the route New Zealand is planning to take. For selected countries,
Table 1.1. shows their share of world GDP (%) and their share of world carbon dioxide emissions (%)
in 2018.

Table 1.1 Share of world GDP (%) and share of world carbon dioxide emissions (%) in 2018 for
selected countries

Country Share of world GDP (%) Share of world carbon dioxide emissions (%)
China 16.1 29.7
Japan 5.7 3.2
New Zealand 0.2 0.1
Thailand 0.6 0.7
United Kingdom 3.3 1.0
United States 23.8 13.9

Answer all parts of Question 1. Refer to the source material in your answers.

1 (a) Calculate New Zealand’s GDP per head in 2020. [1]

(b) Identify two external costs arising from the milk and car industries. [2]

(d) Explain the two plans that the New Zealand government has to reduce external costs to the
environment. [4]

(e) Draw a demand and supply diagram to show the effect of a cheaper substitute on the market
for petrol‑powered cars. [4]

(f) Analyse the relationship between a country’s share of world GDP (%) and its share of world
carbon dioxide emissions (%). [5]

(g) Discuss whether or not an increase in exports of clean and green products will help the New
Zealand government achieve its macroeconomic aims. [6]

(h) Discuss whether or not job losses caused by a change to a carbon‑neutral economy will be
harmful. [6]

Section B

Answer any three questions.

Each question is introduced by stimulus material. In your answer you may refer to this material and/or
to other examples that you have studied.

2 Liechtenstein is a high‑income economy in the middle of Europe. The country’s low tax rates and
low levels of regulation make it an attractive place for foreign firms and individuals to open bank
accounts. Firms’ costs of production in Liechtenstein are high but this is slightly offset by low
indirect taxation.

(a) Identify two types of cost to a firm. [2]

(b) Explain two roles of commercial banks for firms. [4]

(d) Discuss whether or not low tax rates benefit an economy. [8]

3 The number of Chinese restaurants in the UK fell by approximately 7% in 2020 compared to the
year before. Reasons for this include falling demand for Chinese food and increasing competition
from other types of food. Some small firms selling Chinese food are also unwilling to invest in the
latest technology because of the possible opportunity costs.

(a) Identify two challenges facing small firms. [2]

(b) Explain two possible opportunity costs for firms if they invest in the latest technology. [4]

(d) Discuss whether or not competition is harmful to a firm. [8]

4 After the recession that struck Albania in 2013, the country experienced a significant rise in
emigration. Albanian workers and students in other countries have expressed little desire to return.
However, the government is trying to implement policy measures that could attract more people to
return to the country.

(a) Define emigration. [2]

(b) Explain two causes of a recession. [4]

(d) Discuss whether or not an economy benefits from many of its students studying abroad. [8]

5 The food processing, tourism, and education industries all contribute significantly to the government
budget for the US state of Wisconsin. The contribution of the education industry is higher than that
of other industries due to the higher wages earned in education. This industry also contributes to
the population growth of the state. This not only creates private benefits but also external benefits.

(a) Define government budget. [2]

(b) Explain, with examples, the difference between private benefits and external benefits. [4]

(d) Discuss whether or not having a large population is beneficial for the economy. [8]

BLANK PAGE

Cambridge IGCSE™

ECONOMICS 0455/21
Paper 2 Structured Questions October/November 2023

2 hours 15 minutes

You must answer on the enclosed answer booklet.

* 0 0 3 0 5 9 1 0 6 1 *

You will need: Answer booklet (enclosed)

INFORMATION
● The total mark for this paper is 90.
● The number of marks for each question or part question is shown in brackets [ ].

This document has 8 pages. Any blank pages are indicated.

Section A

Read the source material carefully before answering Question 1.

Source Material: Cambridge (UK) and Education

Cambridge fact file 2019

Population 124 800
Percentage of population aged 18–29 30%
Percentage of people who cycle regularly 54%
Percentage of workers with a university qualification 70%

Cambridge ranks number one amongst all UK cities in terms of the percentage of workers with a
university qualification. It is also ranked number two in the UK in terms of the percentage of people
aged 18–29. This is due to the high number of university students in Cambridge. Although the city has
a relatively small population, its contribution to the overall size of the UK economy is significant.

Many firms in Cambridge operate in the education, healthcare, research and development, and hi‑tech
manufacturing industries. Cambridge firms’ exports are highly knowledge‑intensive, making them highly
priced and price‑inelastic in demand. Increasing global incomes have also increased the demand for
services such as education from Cambridge.

The increase in the size of the education industry has the potential to reduce poverty. This is because
a more educated labour force is able to earn higher wages and also have access to more information
on health. Table 1.1 shows the percentage of population aged 25–64 with a university degree and the
GDP per head in selected countries in 2019.

Table 1.1 Percentage of population aged 25–64 with a university degree and the GDP per head
in selected countries in 2019

% of population aged 25–64 with a

Country GDP per head ($)
university degree
Canada 57 46 195
Colombia 22 6429
Hungary 24 16 732
Indonesia 12 4136
Switzerland 43 81 994
UK 46 42 330

Many of the people who live in Cambridge are strong supporters of globalisation and free trade between
countries. A large number of firms in Cambridge depend on export revenues.

Cambridge is an attractive location for growing firms because of the availability of many highly skilled
and educated workers from all over the world. It has good infrastructure including access to ultra‑fast
broadband and transport links to other cities and international airports. However, firms may be faced
with high land and office costs. In 2019, Cambridge was the city with the third highest house prices in
the UK. Poor air quality may also discourage workers from moving to Cambridge.

Answer all parts of Question 1. Refer to the source material in your answers.

1 (a) Calculate the total number of people in Cambridge aged 18–29 in 2019. [1]

(b) Identify two types of industries in Cambridge that operate in the tertiary sector. [2]

(c) Identify two benefits of having highly knowledge‑intensive exports. [2]

(d) Explain how having a more educated labour force can reduce poverty. [4]

(e) Draw a demand and supply diagram to show the effects of increased global income on the
market for education in Cambridge. [4]

(f) Analyse the relationship between the percentage of population aged 25–64 with a university
degree and GDP per head. [5]

(g) Discuss whether or not free trade is beneficial for a city such as Cambridge. [6]

(h) Discuss whether or not firms in Cambridge will continue to grow. [6]

Section B

Answer any three questions.

Each question is introduced by stimulus material. In your answer you may refer to this material and/or
to other examples that you have studied.

2 A third of the world’s ski resorts are located in the Alps. Prices for holidays in the Alps are relatively
higher than in other regions. The recent pandemic, however, reduced the revenues of many large
and small firms in the tourism industry in the winter season of 2020/2021. Many blamed strict
government regulations for this. However, government intervention also helped many firms to
survive.

(a) State how average revenue is calculated. [2]

(b) Explain two advantages of a large firm. [4]

(d) Discuss whether or not government intervention is beneficial for firms. [8]

3 Digital money, such as cryptocurrencies, is increasingly being used. Digital money transactions
take place on electronic devices such as computers and smartphones. However, there can be
market failure due to external costs arising from high energy usage of non‑renewable sources.
One way of reducing external costs is to tax the product.

(a) Identify two types of tax. [2]

(b) Explain two functions of money. [4]

(c) Analyse the consequences of market failure. [6]

(d) Discuss whether or not a tax on a product can reduce external costs. [8]

4 Malaysia once specialised in the production and export of natural rubber. The production of
natural rubber was very labour‑intensive. However, despite still being in the top 5 of natural rubber
exporters in the world, Malaysia has moved towards producing manufactured goods that use
natural rubber instead of just producing and exporting this primary product.

(a) Identify, other than natural rubber, two primary‑sector products. [2]

(b) Explain two reasons why a country may change its specialisation. [4]

(d) Discuss whether or not labour‑intensive production will harm an economy. [8]

5 One reason why the price of houses in cities such as Hong Kong, London, and New York is very
high, is the low price elasticity of supply of houses. Trade unions in some of these cities are
calling for more affordable housing for workers. Governments are also trying to implement various
microeconomic policy measures to reduce the price of houses. In addition, the stability of the
housing market can impact upon the effectiveness of monetary policy.

(a) Identify two monetary policy measures. [2]

(b) Explain two microeconomic policy measures that can be taken by a government to reduce
the price of a product. [4]

(d) Discuss whether or not trade unions benefit workers. [8]

BLANK PAGE

Cambridge IGCSE™

ECONOMICS 0455/22
Paper 2 Structured Questions October/November 2023

2 hours 15 minutes

You must answer on the enclosed answer booklet.

* 2 8 1 3 7 9 1 3 6 0 *

You will need: Answer booklet (enclosed)

INFORMATION
● The total mark for this paper is 90.
● The number of marks for each question or part question is shown in brackets [ ].

This document has 8 pages. Any blank pages are indicated.

Section A

Read the source material carefully before answering Question 1.

Source material: Will Honduras become a more successful economy?

Honduras fact file 2020

Population 10 m
Population without access to electricity 0.83 m
Unemployment rate 6.1%
Inflation rate 4.2%
Government budget deficit as % of GDP 9.5%

Honduras is a lower middle-income country which relies heavily on trade with the US. More than half of
Honduran exports go to the US and 40% of its imports come from the US. A high number of Hondurans
work in the US and send money back home to their relatives.

Honduras used to concentrate on growing bananas and coffee, gaining skills and a good reputation
in those industries. Now, Honduras produces a greater range of products including clothes, chemicals
and paper. This diversification has reduced the uncertainty arising from sudden changes in demand
and supply. For example, tariffs could be imposed on Honduran coffee or there could be a report
stating that eating bananas is good for health.

While employment is declining in agriculture, it is increasing in the clothes industry in Honduras.

Training for workers in the clothes industry is expected to increase and working conditions to improve.
The firms are also using more capital goods. It is, however, uncertain what will happen to the prices of
cotton, wool and other materials used to make clothes.

A successful clothes industry has the potential to reduce poverty in Honduras. The Honduran
government tries to reduce poverty by, for example, providing unemployment benefit. A major reason
for the government seeking to lower poverty is to increase life expectancy. Table 1.1 shows levels
of poverty (percentage of population living on less than $1.90 a day) and life expectancy in selected
countries.

Table 1.1 Percentage of population living in poverty and life expectancy in selected countries

Country % of population living in poverty Life expectancy (years)

Chad 38.1 54
Honduras 16.9 75
Kenya 37.1 66
Maldives 3.5 79
South Sudan 44.7 58
Sweden 0.2 83

A more successful Honduran economy would raise incomes. The country has a progressive income
tax system, so there could be a significant rise in tax revenue. A more successful economy would also
be likely to encourage more investment. Unemployment would be expected to fall which, in turn, could
influence consumer spending.
© UCLES 2023 0455/22/O/N/23
3

Answer all parts of Question 1. Refer to the source material in your answers.

1 (a) Calculate what percentage of Honduran people did not have access to electricity in 2020. [1]

(b) Identify two benefits the Honduran economy could gain from a growth in the US economy.
[2]

(c) Explain one advantage of an economy specialising. [2]

(d) Explain two ways a government could redistribute income. [4]

(e) Draw a demand and supply diagram to show how a report stating that bananas are good for
health would affect the market for bananas. [4]

(f) Analyse the relationship between the percentage of population living in poverty and life
expectancy. [5]

(g) Discuss whether or not the cost of producing clothes in Honduras will fall in the future. [6]

(h) Discuss whether or not a fall in unemployment in Honduras is likely to cause inflation. [6]

Section B

Answer any three questions.

Each question is introduced by stimulus material. In your answer you may refer to this material and/or
to other examples that you have studied.

2 Botswana uses both capital goods and labour in its diamond mining industry. The country had an
average economic growth rate of 3.8% between 2015 and 2019 compared to a global average
of 2.8%. Over this period, the country experienced a low inflation rate and a move away from
protectionism and towards free international trade.

(a) Define, with an example, a capital good. [2]

(b) Explain two reasons why a low inflation rate may increase a country’s economic growth rate.
[4]
(c) Analyse how a government could reduce protectionism and move towards free international
trade. [6]

(d) Discuss whether or not a country will benefit from diamond mining. [8]

3 In 2020, some firms in Suriname, a South American country, stopped production. This was
because the firms could not cover their variable costs, as well as some of their fixed costs. The
reduction in the country’s output resulted in a rise in its unemployment rate. The government
used supply-side policy measures to reduce unemployment. In 2021, the number of firms in some
markets fell again, but this time it was when output was rising.

(a) Define, with an example, a fixed cost. [2]

(b) Explain two types of unemployment. [4]

(d) Discuss whether or not having fewer firms in a market will benefit consumers. [8]

4 In the US, the supply of meat from emus, a large bird, is price-elastic. Recently, US farmers have
switched to keeping other livestock and growing crops that changed their demand for labour. US
farmers are influenced by the subsidies the government provides for the production of selected
food items. Some people are reluctant to become farm workers as they think living standards are
low in rural areas.

(a) Define elastic supply. [2]

(b) Explain two reasons why a government may subsidise food production. [4]

(c) Analyse what influences a farmer’s demand for labour. [6]

(d) Discuss whether or not people living in cities have a higher living standard than those living in
rural areas. [8]

5 In 2020, Singapore experienced a decrease in both its population size and its labour force. 2020
was a year of great change in a number of Singaporean markets. Some moved from disequilibrium
to equilibrium. Despite all these changes, Singapore managed to increase its exports of goods
and services.

(a) Identify two benefits of a decrease in a country’s population size. [2]

(b) Explain how a market moves from disequilibrium to equilibrium. [4]

(c) Analyse, using a production possibility curve (PPC) diagram, the effect of a decrease in the
size of a country’s labour force on its economy. [6]

(d) Discuss whether or not an increase in exports will benefit an economy. [8]

BLANK PAGE

Cambridge IGCSE™

ECONOMICS 0455/23
Paper 2 Structured Questions October/November 2023

2 hours 15 minutes

You must answer on the enclosed answer booklet.

* 4 3 1 5 6 2 7 0 3 1 *

You will need: Answer booklet (enclosed)

INFORMATION
● The total mark for this paper is 90.
● The number of marks for each question or part question is shown in brackets [ ].

This document has 8 pages. Any blank pages are indicated.

Section A

Read the source material carefully before answering Question 1.

Source material: Changes in the economy of Montenegro

Montenegro fact file 2020

Population 608 000
GDP $4.8 bn
Government budget deficit –$0.6 bn
Unemployment rate 18.0%
Inflation rate 0.4%

Montenegro is a European country that has seen an increase in the role of its private sector. By 2020,
90% of state‑owned firms had been privatised. All commercial banking, telecommunications and
aluminium production has been transferred to the private sector. The country’s banks now have more
computers, more workers and more office buildings.

Most years, Montenegro attracts three times as many tourists as the number of people who live in
the country. Tourism is a very competitive market. Demand for holidays is price‑elastic which has
implications for the pricing strategy of firms in the industry. The proportion of workers employed in
tourism and other tertiary sector industries has increased. In 2020, 75% of Montenegro’s labour force
were employed in the tertiary sector.

Some of the workers employed in the primary sector help in the growth and export of oranges. It has
been suggested that a minimum price should be set for oranges and some other crops. Changes in
the price of a country’s exports can affect both the trade in goods and services balance and the current
account balance of its balance of payments. Table 1.1 gives selected details of six East European
countries’ balance of payments in 2020.

Table 1.1 Trade in goods and services balance and current account balance of six East
European countries 2020

Country Trade in goods and services balance Current account balance

($ million) ($ million)
Bosnia & Herzegovina –2 914 –624
Bulgaria 2 318 2 742
Croatia –317 1 456
Kosovo –2 141 –459
Montenegro –1 174 –837
Slovenia 4 609 3 049

A country’s international trade position is influenced by the amount and pattern of consumer spending.
Privatisation has had an influence on consumer spending. Moving to the private sector has affected
investment, the number of workers employed and competition in those industries. It has also
affected firms’ objectives, prices and their responsiveness to changes in consumer demand. In 2020,
Montenegro experienced very low inflation. It was expected that this could turn into deflation. A fall in
the price level could affect the country’s output, employment and balance of payments.
© UCLES 2023 0455/23/O/N/23
3

Answer all parts of Question 1. Refer to the source material in your answers.

1 (a) Calculate Montenegro’s budget deficit as a percentage of its GDP. [1]

(b) Identify two examples of capital goods in Montenegro. [2]

(d) Explain two ways the pattern of employment has changed in Montenegro in recent years. [4]

(e) Draw a demand and supply diagram to show the effect of a minimum price set above the
equilibrium price on the market for oranges. [4]

(f) Analyse the relationship between countries’ trade in goods and services balances and their
current account balances. [5]

(g) Discuss whether or not privatisation is likely to have benefited consumers in Montenegro. [6]

(h) Discuss whether or not deflation would benefit the Montenegro economy. [6]

Section B

Answer any three questions.

Each question is introduced by stimulus material. In your answer you may refer to this material and/or
to other examples that you have studied.

2 In 2019, Mozambique was hit by a serious storm which destroyed bridges, factories, roads and
electricity lines. Almost 60% of Mozambique’s population live in absolute poverty. The country’s
people are keen to increase Mozambique’s economic development. There is a high level of
government intervention in Mozambique’s economy. Although Mozambique does not impose
import quotas, it does impose a range of import tariffs.

(a) Identify two reasons why a person may experience absolute poverty. [2]

(b) Explain two causes of an increase in a country’s economic development. [4]

(d) Discuss whether or not imposing tariffs on imports will increase a country’s output. [8]

3 Saudi Arabia’s economic system may change in the future. The country’s central bank is dealing
with more private sector banks. In 2020, the population’s average age of 31.8 was just above the
global average of 31.2. In that year, plans were announced to build a city where no cars would be
needed or allowed. Such a development might encourage more young people to move to Saudi
Arabia.

(a) Identify two types of economic system. [2]

(b) Explain two functions of a central bank. [4]

(c) Analyse the advantages to a country of having a young population. [6]

(d) Discuss whether or not a ban on cars in a city will benefit the city’s households and firms. [8]

4 People in Ecuador buy products using a variety of forms of money. The Ecuadorian government
pays public sector workers’ wages directly into their bank accounts. In 2019, some Ecuadorian
firms’ profits were affected by advances in technology. That year, the Ecuadorian government cut
public sector workers’ hours and, in 2020, it reduced its spending. Economists were uncertain
what effect the decrease in government spending would have on unemployment.

(a) Identify two characteristics of money. [2]

(b) Explain two reasons why a reduction in their working hours may not cause public sector
workers to move to working in the private sector. [4]

(d) Discuss whether or not a decrease in government spending will increase unemployment. [8]

5 In 2020, Paraguay’s Consumer Prices Index rose by 3% and its foreign exchange rate fluctuated.
Each year Paraguay experiences net emigration. People leave a country for a number of reasons.
These include a low rate of economic growth and high level of market failure. The Paraguayan
government does intervene in the economy in an attempt to reduce market failure.

(a) Define Consumer Prices Index. [2]

(b) Explain two ways a government could intervene to reduce market failure. [4]

(d) Discuss whether or not an increase in a country’s economic growth rate will reduce emigration
from the country. [8]

BLANK PAGE

Cambridge IGCSE™

ECONOMICS 0455/22
Paper 2 Structured Questions February/March 2024

2 hours 15 minutes

You must answer on the enclosed answer booklet.

* 8 2 6 9 3 3 8 8 6 7 *

You will need: Answer booklet (enclosed)

INFORMATION
● The total mark for this paper is 90.
● The number of marks for each question or part question is shown in brackets [ ].

This document has 8 pages. Any blank pages are indicated.

Section A

Read the source material carefully before answering Question 1.

Source material: Changes in the Danish economy

Denmark fact file

GDP 2021 $372 bn
Labour force in employment 2020 3m
Total wages paid 2020 $252 bn
HDI value 2019 0.94
HDI ranking 2019 10th

Denmark is a high-income, North European country. The Danish population have high living standards
and enjoy relatively long hours of leisure time. They spend this time in a variety of ways including
cycling, jogging and playing golf.

Danish workers are employed in a range of industries. Denmark used to be a leading shipbuilding
country but now the industry is in decline. Ships have substitutes in other forms of transport. Also, it
may be possible to postpone the purchase of ships, they take a long time to produce and they are
expensive to store. In contrast to the shipbuilding industry, the Danish toy industry has grown in recent
years.

Denmark’s shipbuilding and toy industries are in the private sector. Denmark’s economic performance
is also influenced by changes in the public sector. Table 1.1 shows Danish government spending and
GDP over the period 2015 to 2021.

Table 1.1 Danish government spending and GDP 2015 – 2021

Year Government spending ($bn) GDP ($bn)

2015 77 303
2016 78 314
2017 79 333
2018 80 356
2019 82 350
2020 84 356
2021 86 372

Denmark is heavily involved in international trade. It usually has a surplus on the current account of
its balance of payments. International trade affects the availability of products in the country and the
country’s foreign exchange rate. It also affects the country’s GDP and level of employment.

How people work in Denmark, as in most countries, has changed in recent years. More people now
spend at least some of their working hours working from home. This change is expected to affect
productivity and help firms keep their workers. Households may be encouraged to move out of cities
and to buy larger homes. There may also be changes in demand for transport, demand for food sold in
city centres and firms’ need for office space.

Answer all parts of Question 1. Refer to the source material in your answers.

1 (a) Calculate the average wage paid in Denmark in 2020. [1]

(b) Identify two possible opportunity costs of a Danish person using their leisure time to cycle.
[2]

(d) Explain two reasons why the supply of ships is price-inelastic. [4]

(e) Analyse the relationship between government spending and GDP in Denmark. [4]

(f) Analyse, using a demand and supply diagram, how an increase in the birth rate would affect
the market for toys. [5]

(g) Discuss whether or not a surplus on the current account of its balance of payments would
benefit the Danish economy. [6]

(h) Discuss whether or not more people working from home will benefit an economy. [6]

Section B

Answer any three questions.

Each question is introduced by stimulus material. In your answers you may refer to the material and/or
other examples you have studied.

2 Since 2016, South Korea’s population has declined, due to a falling birth rate, and a high proportion
of its population is now aged over 64. The South Korean government has used tax revenue to give
cash incentives to couples to have more children. However, many parents have chosen to have
fewer children and spend more on each child to ensure they get a good education. South Korea
now has fewer but larger schools.

(a) Identify two benefits people may gain from a good education. [2]

(b) Explain two reasons for a change in the amount of tax revenue a government receives. [4]

(d) Discuss whether or not having a high proportion of a country’s population over the age of 64
is a benefit to its economy. [8]

3 Some firms in Monaco have experienced external growth. Firms in Monaco pay high wages.
Workers in Monaco benefit from fiscal policy which contributes to high employment. Their
government does impose VAT on food, including fruit. Some economists have suggested that
instead of taxing fruit, governments should provide free fruit to consumers.

(a) Define external growth of firms. [2]

(b) Explain two reasons why low-skilled workers may be highly paid. [4]

(c) Analyse how fiscal policy can increase employment. [6]

(d) Discuss whether or not a government should provide free fruit to consumers. [8]

4 In 2021, the Suez Canal was blocked by one of the world’s biggest container ships. This affected
some firms’ profits and caused a shortage in a number of products. The delivery of luxury chocolate
and salt, for example, was delayed. These two goods have differences in their price elasticity
of demand. The disruption to international trade created particular difficulties for those countries
which import most of the food they consume.

(a) Define a shortage. [2]

(b) Explain two ways a firm can increase its profit. [4]

(c) Analyse the reasons why the price elasticity of demand for one brand of luxury chocolates is
likely to be different from that of salt. [6]

(d) Discuss whether or not a country should import most of the food it consumes. [8]

5 New Zealand is a high-income country with a low unemployment rate and a surplus of imports
over exports. Recently, its government has made some important economic decisions. In 2022,
it banned everyone born after 2008 from buying cigarettes. A year before, it gave permission for
firms to explore for oil in the country.

(a) Define unemployment rate. [2]

(b) Explain two reasons why a government may discourage cigarette smoking. [4]

(c) Analyse why a country’s exports may decrease. [6]

(d) Discuss whether or not the discovery of oil in a country will benefit its economy. [8]

BLANK PAGE

Cambridge IGCSE™

ECONOMICS 0455/21
Paper 2 Structured Questions May/June 2024

2 hours 15 minutes

You must answer on the enclosed answer booklet.

* 1 4 5 2 2 8 8 0 8 1 *

You will need: Answer booklet (enclosed)

INFORMATION
● The total mark for this paper is 90.
● The number of marks for each question or part question is shown in brackets [ ].

This document has 8 pages. Any blank pages are indicated.

Section A

Read the source material carefully before answering Question 1.

Source material: What does the future hold for Nicaragua?

Nicaragua fact file 2020

Population 6.5m
Labour force 3.1m
Unemployment rate 4.8%
Economic growth rate – 4.3%
Agricultural exports as a percentage of total exports 60.0%

Nicaragua is the largest country in Central America. It has a large agricultural sector with one of its
main exports being coffee. It has been estimated that a 10% change in the price of coffee will cause a
3% change in the quantity of coffee demanded. The country’s agricultural output, including coffee, is
often affected by natural disasters including droughts and earthquakes.

Nicaragua is the country with the lowest Gross Domestic Product (GDP) per head in Central America.
Wages are particularly low in the rural areas of the country. There is a high degree of income
inequality and firms tend to earn lower profits than in other Central American countries. The number of
Nicaraguans who were willing and able to work but could not find a job increased as calculated by both
the claimant count and the labour force survey in 2020.

The purchasing power of Nicaraguan consumers fell in 2020 as prices rose by more than incomes.
However, the country’s currency, the cordoba, was still generally acceptable. It continued to act as a
medium of exchange and store of value.

Nicaragua’s future economic performance will be influenced by a number of factors. These include
the proportion of the labour force employed in agriculture, the size of the country’s firms and what the
country produces. Table 1.1 shows the percentage of the labour force employed in agriculture and
GDP per head in selected countries in 2020.

Table 1.1 The percentage of the labour force employed in agriculture and GDP per head in
selected countries in 2020

Country Labour force employed in GDP per head ($)

agriculture (%)
Bahamas 3 25 194
Barbados 10 15 374
Costa Rica 14 12 141
Dominica 40 7 004
Nicaragua 31 1 905
Saint Lucia 22 8 805

Nicaraguan firms tend to be relatively small. These firms often get to know their individual customers’
requirements but many are not large enough to benefit from economies of scale. In recent years, there
has been a boom in coffee shops in Nicaragua. Between 2015 and 2020, the number of coffee shops
more than doubled in the country. These shops differentiate themselves through their customer service
and the quality of the coffee they serve.

Nicaragua is the world’s twelfth largest producer of coffee. Global coffee consumption continues to
increase. This trend may increase Nicaragua’s coffee output and exports.
© UCLES 2024 0455/21/M/J/24
3

Answer all parts of Question 1. Refer to the source material in your answers.

1 (a) Calculate the price elasticity of demand for coffee. [1]

(b) Identify two rewards to factors of production in Nicaragua. [2]

(c) Explain one way in which unemployment is measured. [2]

(d) Explain two functions of money in Nicaragua. [4]

(e) Analyse the relationship between the percentage of the labour force employed in agriculture
and GDP per head. [4]

(f) Analyse, using a demand and supply diagram, how a drought could affect the market for
coffee. [5]

(g) Discuss whether or not small firms benefit Nicaraguan consumers. [6]

(h) Discuss whether or not Nicaragua should devote more of its resources to coffee production.
[6]

Section B

Answer any three questions.

Each question is introduced by stimulus material. In your answers you may refer to the material and/or
other examples you have studied.

2 In recent years, the mobility of labour, the number of women in the labour force and GDP
have increased in Bangladesh. In 2019, the central bank of Bangladesh approved three new
commercial banks. In that year, women on average earned 77% of the pay of men in Bangladesh.
The country’s economy experienced the world’s seventh highest economic growth rate, with an
increase in GDP of 7.4%.

(a) Identify two influences on the mobility of labour. [2]

(b) Explain two benefits that consumers may gain from having more commercial banks. [4]

(d) Discuss whether or not people living in countries with a high GDP enjoy higher living standards
than people in countries with a low GDP. [8]

3 Indonesia operates a mixed economic system. Indonesia’s central bank, Bank Indonesia, aims
for stable prices. The country’s price level can be influenced by changes in population size.
Indonesia’s population continues to grow but at a slower rate. Many of the country’s industries are
growing with particularly fast growth in Indonesian domestic and international air travel.

(a) Identify who allocates resources in a mixed economic system. [2]

(b) Explain two benefits a firm may gain from an increase in the size of the country’s population.
[4]

(d) Discuss whether or not the global economy would benefit from an increase in air travel. [8]

4 Healthcare is in the tertiary sector. Healthcare provides both private and external benefits. In 2019,
there were five mergers between large US healthcare firms. As well as operating in the US, US
healthcare firms operate in a number of host countries, including Singapore.

(a) Define tertiary sector using an example apart from healthcare. [2]

(b) Explain the difference between a private benefit and an external benefit of healthcare. [4]

(c) Analyse why a government may prevent a horizontal merger. [6]

(d) Discuss whether or not a foreign multinational company (MNC) will continue to produce in a
host country for many years. [8]

5 In 2020, the price of gold fell in Vietnam. That year, Vietnam was one of Asia’s best performing
economies. Unlike some Asian economies, Vietnam did not experience a recession. Its total
output, exports and imports all increased. Unemployment did increase from 2.0% to 2.3% but
remained very low. One of the aims of fiscal policy can be to achieve full employment.

(a) Identify how the effect of a fall in the price of gold would be shown on a demand curve for
gold. [2]

(b) Explain two disadvantages of a recession. [4]

(c) Analyse why a country may demand more imports. [6]

(d) Discuss whether or not fiscal policy can achieve full employment. [8]

BLANK PAGE

Cambridge IGCSE™

ECONOMICS 0455/22
Paper 2 Structured Questions May/June 2024

2 hours 15 minutes

You must answer on the enclosed answer booklet.

* 9 7 3 6 6 3 7 6 0 6 *

You will need: Answer booklet (enclosed)

INFORMATION
● The total mark for this paper is 90.
● The number of marks for each question or part question is shown in brackets [ ].

This document has 8 pages. Any blank pages are indicated.

Section A

Read the source material carefully before answering Question 1.

Source material: The challenges facing the Tunisian government

Tunisia fact file 2020

Trade in goods and services balance – $3bn
Primary and secondary income balance $0.6bn
Unemployment rate 17%
Tunisian dinar (TND) / US dollar exchange rate 1TND = $0.35

Tunisia had a government budget deficit for a number of years. Between 2015 and 2020, the Tunisian
government carried out reforms to reduce the tax burden, to rely more on indirect taxes and to make
the tax system more efficient and more economical.

As well as taxing a range of products, the Tunisian government also regulates the price of some
products including flour and milk. Government control of the price of flour and milk can help reduce
poverty and prevent monopoly firms exploiting their market power. The Tunisian government also
subsidises the production of electricity. The subsidy affects the cost of producing electricity, and the
change in the price of electricity affects other firms’ costs. This form of government spending can help
reduce inflationary pressure but can also affect the efficiency of electricity production.

While some firms benefit from the subsidy on electricity production, they also experience periods when
their other costs of production rise. Tunisian shoe producers have recently experienced a rise in wage
costs and a decline in the number of workers they employ. The average wage paid to Tunisian workers
and the Tunisian inflation rate changed between 2014 and 2020 as shown in Fig. 1.1.

9
8
7
Percentage (%) 6
5
4
3
2 Change in average wage
1 Inflation rate
0
2014 2015 2016 2017 2018 2019 2020
Year

Fig. 1.1 Change in average wage and the inflation rate in Tunisia 2014 – 2020

Unemployment has been a problem in Tunisia for many years. In 2020, the government passed a law
which promised that workers who had been unemployed for ten years or more would be employed by
the public sector. To reduce the time spent moving between jobs, it increased labour market information
available to workers and employers and did not raise unemployment benefit in line with inflation.

The Tunisian foreign exchange rate fluctuated in 2020. This affected the price of the country’s exports
and imports. It also affected the current account of its balance of payments, economic growth, inflation
and unemployment.

Answer all parts of Question 1. Refer to the source material in your answers.

1 (a) Calculate Tunisia’s balance on the current account of its balance of payments. [1]

(b) Identify two qualities of a good tax that the Tunisian government aimed to achieve. [2]

(d) Explain two ways the Tunisian government tried to reduce frictional unemployment. [4]

(e) Analyse the relationship between the change in Tunisia’s average wage and inflation rate. [4]

(f) Analyse, using a demand and supply diagram, how an increase in wage costs would affect
the market for shoes. [5]

(g) Discuss whether or not the Tunisian government should continue to subsidise electricity
production. [6]

(h) Discuss whether or not a rise in the value of the Tunisian dinar would benefit the Tunisian
economy. [6]

Section B

Answer any three questions.

Each question is introduced by stimulus material. In your answers you may refer to the material and/or
other examples you have studied.

2 In 2020, wages paid to Mexican workers, including those in the primary sector, fell. This fall
contributed to a 9% rise in poverty in the country. In the same year, many small and medium-sized
firms closed down. The country also suffered from traffic congestion. Its capital, Mexico City, is the
world’s most congested city.

(a) Identify two possible opportunity costs of producing primary sector products. [2]

(b) Explain two policy measures which may reduce poverty. [4]

(d) Discuss whether or not a government should encourage people to walk to school and work.
[8]

3 South America is a large geographical area with millions of microeconomic decision-makers.

During a recent pandemic, schools stayed closed for longer than anywhere else in the world. As
a result, students received less education. The World Bank estimated that the average student
would earn $24,000 less over their lifetime. Some students may earn only the minimum wage. In
2020, South America had an inflation rate of 6.3% and an economic growth rate of only 1.8%.

(a) Identify the difference between microeconomics and macroeconomics. [2]

(b) Explain how less education can reduce a person’s lifetime earnings. [4]

(d) Discuss whether or not an economy with a high inflation rate will have a low economic growth
rate. [8]

4 Tajikistan is one of Asia’s low-income countries. Its currency, the somoni, has the key characteristics
of money. More than one million Tajik people work abroad, mostly in Russia. In 2020, the Tajik
government was concerned that the country’s economy might experience a recession which could
cause a fall in tax revenue. Despite this possibility, some Tajik firms bought new capital equipment.

(a) Identify two reasons why tax revenue is likely to fall during a recession. [2]

(b) Explain two characteristics of money. [4]

(d) Discuss whether or not consumers would benefit from firms buying new capital equipment.
[8]

5 Free goods and economic goods are consumed in Poland. In 2020, demand for both economic
goods and factors of production increased in Poland. For example, Polish consumers demanded
more football shirts and the Polish government increased its spending on housing for the country’s
population.

(a) Identify two free goods. [2]

(b) Explain two influences on demand for factors of production. [4]

(c) Analyse the effect of an increase in demand for football shirts on demand for football shorts
and demand for basketball shirts. [6]

(d) Discuss whether or not an increase in government spending on housing would benefit an
economy. [8]

BLANK PAGE

Cambridge IGCSE™

ECONOMICS 0455/23
Paper 2 Structured Questions May/June 2024

2 hours 15 minutes

You must answer on the enclosed answer booklet.

* 2 1 9 2 3 1 0 0 5 5 *

You will need: Answer booklet (enclosed)

INFORMATION
● The total mark for this paper is 90.
● The number of marks for each question or part question is shown in brackets [ ].

This document has 8 pages. Any blank pages are indicated.

Section A

Read the source material carefully before answering Question 1.

Source material: Indonesia and climate change

Indonesia fact file 2021

GDP of Indonesia $1100bn
Economic growth rate of Indonesia 3.7%
GDP of Jakarta $300bn
Economic growth rate of Jakarta 2.4%

Jakarta, Indonesia’s capital city from 1945 to 2024, is one of the world’s fastest sinking and most
polluted cities. The city is expected to record a large decrease in real Gross Domestic Product (GDP)
per head which could lead to a fall in living standards.

The free market can be blamed for air pollution and rising sea levels across some areas of Indonesia.
Schools and other buildings have been flooded and roads have been destroyed. Floods have also led
to an increase in diseases transmitted through water and mosquitoes which breed in water.

Farmland has been submerged, cutting off a vital source of income for many farmers. This has led to
internal migration (people moving between regions of the same country). For example, some farmers
have moved to areas where climate change has led to the production of different crops. There has
been less pressure on both natural and local government resources in areas which people have
left. However, these movements could lead to the collapse of entire communities and increase the
inequality between workers who are more mobile and those who are less mobile.

Governments around the world have reacted to climate change by spending more on the environment.
Table 1.1 shows the GDP and government spending on the environment of selected countries in 2019.

Table 1.1 GDP and government spending on the environment of selected countries in 2019

Country GDP ($bn) Government spending on

the environment ($bn)
France 2730 27.03
Indonesia 1120 2.58
Japan 5150 58.20
Switzerland 730 4.02
Thailand 540 0.32

The Indonesian government has also reacted to environmental issues by relocating its capital city. The
city of Nusantara will replace Jakarta as the capital city in 2024. The cost of building this new city is
expected to be $32.5 billion. This city will not only provide job opportunities but could also reduce the
inequality between the different regions of Indonesia. Jakarta is located on the island of Java which
is a wealthier region than Kalimantan. The new city, Nusantara, will be located in Kalimantan region.
In addition, the government intends for the new capital city to be carbon-neutral. However, opponents
of this project have said that the cost is too high. They also claimed that the project will only benefit a
small number of wealthy and powerful people.

Answer all parts of Question 1. Refer to the source material in your answers.

1 (a) Calculate the percentage contribution of Jakarta to Indonesia’s GDP in 2021. [1]

(b) Identify two examples of external costs ignored by the free market. [2]

(d) Explain two ways climate change can lead to a fall in the Human Development Index (HDI) of
Indonesia. [4]

(e) Draw a production possibility curve (PPC) diagram to show the impact of climate change on
an economy such as Indonesia. [4]

(f) Analyse the relationship between GDP and government spending on the environment. [5]

(g) Discuss whether or not internal migration benefits an economy such as Indonesia. [6]

(h) Discuss whether or not relocating the capital city from Jakarta will benefit the Indonesian
economy. [6]

Section B

Answer any three questions.

Each question is introduced by stimulus material. In your answer you may refer to this material and/or
to other examples that you have studied.

2 Shenzhen, once a fishing village, is now one of China’s richest cities with a large secondary
sector. This transformation was possible as local villages shared resources to develop their area.
For example, they constructed new housing to rent to migrants working in the factories in the city.
However, the supply of housing has not been able to keep up with demand and the government is
now setting a maximum price on housing.

(a) Define secondary sector using an example apart from construction. [2]

(b) Explain two key resource allocation decisions. [4]

(d) Discuss whether or not a government should introduce a maximum price on housing. [8]

3 Since 2020, the revenue gained in the video gaming industry has been higher than the revenue
in the film industry. The fastest growing part of the video gaming industry is mobile gaming, which
is a substitute for console gaming. Young people are spending many hours playing video games
and some governments are concerned that this may have negative effects on their health and
educational progress. Therefore, regulations have been introduced to reduce the time young
people spend playing these games.

(a) Identify two pairs of products, not in the gaming industry, which are substitutes. [2]

(b) Explain two reasons why a firm’s revenue may increase. [4]

(d) Discuss whether or not it would benefit the economy if a government imposed regulations on
video game use by young people. [8]

4 In 2021, the US had a trade in goods deficit on the current account of its balance of payments.
The US has many firms in a wide range of industries. Import tariffs are used to protect some of
these industries. The US government’s higher spending on healthcare, which reached $797bn
that year, also affected many of the country’s industries.

(a) Define a trade in goods deficit. [2]

(b) Explain two ways firms can be classified. [4]

(d) Discuss whether or not a government should increase its spending on healthcare. [8]

5 In 2020, investment in vaccine production was very high. There was a plan for a major vaccine
producer to horizontally merge with another firm but the plan was cancelled. This was not surprising
as a similar merger of two firms in the same industry had failed the previous year. However, most
firms in this industry are still meeting their objectives and also creating many external benefits for
the wider economy.

(a) Identify two benefits of a horizontal merger. [2]

(b) Explain two possible external benefits of vaccines. [4]

(d) Discuss whether or not investment is beneficial to an economy. [8]

BLANK PAGE

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