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1 FA July 2024 MS

The document outlines the formative assessment for Economics at Higher and Standard Level scheduled for July 29, 2024, lasting 35 minutes. It includes instructions for candidates, two evaluation questions regarding economic growth and income inequality, and emphasizes the need for real-world examples, diagrams, and a balanced conclusion. The assessment aims to gauge understanding of economic concepts and their implications on society and development.

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udayanrawal31
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5 views3 pages

1 FA July 2024 MS

The document outlines the formative assessment for Economics at Higher and Standard Level scheduled for July 29, 2024, lasting 35 minutes. It includes instructions for candidates, two evaluation questions regarding economic growth and income inequality, and emphasizes the need for real-world examples, diagrams, and a balanced conclusion. The assessment aims to gauge understanding of economic concepts and their implications on society and development.

Uploaded by

udayanrawal31
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Formative Assessment (2024-2025)

29th July 2024

Economics
Higher & Standard Level

Day: Monday
Date: July 29, 2024
Duration: 35
minutes

Instructions to candidates

 Do not turn over this examination paper until instructed to do so.


 You are permitted access to a calculator for this paper.
 All questions are compulsory.
 Read the case study and answer all the subsequent questions given.
 Use fully labelled diagrams where appropriate.
 The maximum mark for this examination paper is [15 marks].
____________________________________________________________________

Q1 Using real world examples, evaluate the argument that economic growth is always good?

Responses should include the following:


A definition of economic growth.
Arguments in support of the view that economic growth is always good.
For example, countries with high levels of GDP normally also have a high HDI. This may be because
nations that experience economic growth, will normally have greater resources to invest in infrastructure and
improvements in health and education. In many cases, economic growth also leads to rises in income
levels and employment opportunities.
Examples of nations that have made significant improvements to their quality of life as a result of significant
rises in economic growth. Examples might include China or other emerging economies that have
experienced sharp falls in poverty and improvements to HDI, following a significant rise in economic growth.
A recognition of the alternative perspective, that why economic growth will often lead to improvements in the
HDI, that this is not always the case. For example, it could be noted that the collection of GDP / GNI data
contains weaknesses. For instance changes to GDP / GNI do not necessarily take account of disparities in
the distribution of income or the quality of other non-economic indicators of development - e.g. working
conditions, life expectancy and other quality of life indicators such as the availability of new products,
environmental conditions, defence expenditure, the size of the underground economy or the value of non-
marketed output e.t.c.

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A relevant diagram illustrating the costs and benefits of economic growth, such as the private and social
costs of increased consumption of demerit goods, as well as the size of the welfare loss and the
externalities associated with unregulated markets. Examples of this might be a sharp rise in pollution or
traffic congestion within fast-growing cities or the fact that some LEDCs, have experienced high rates of
economic growth but have also seen sharp rises in economic degradation or significant gaps in wealth and
income inequality. For example, the diagram above and to the right, illustrates one of the effects of
economic growth, a rise in traffic congestion, pollution or another demerit good. The result is an increase in
welfare loss, resulting from the increase in consumption of some demerit goods, represented on the diagram
by Q1 rather than the socially optimum level of Q2.

A short conclusion weighing up the relative merits of both arguments and the impact upon different
stakeholders, as well as the short-term as well as long-term consequences upon sustainability. For
example, a conclusion might recognise that while the net welfare effect of economic growth is likely to be
positive, some stakeholders, typically the young and skilled will benefit more than others. The conclusion
might also recognise that in some cases the positive effects of sustained economic growth, might not lead to
higher living standards for a period of time.

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Q2 Using a real-world example, evaluate the view that the most significant impact of income inequality
is the way it limits growth in the long-run aggregate supply. [15]

Answers might include:

 Definitions of income and inequality and long-run aggregate supply.

 A diagram to show the LRAS

 An explanation that income inequality limits the growth in LRAS because low-income
households do not have enough access to education, training and healthcare which makes them
unproductive workers. Low-income people also lack the capital to start their own businesses
to contribute to the LRAS. These two factors mean the LRAS cannot increase in the way
shown in the diagram.

 An example to illustrate the limits on the growth of LRAS. In this case, India could be used.

 Evaluation might include discussion of the other implications of income inequality such as the
demand side implications of a country having a high proportion of people on low incomes who
cannot add as much to AD as people on higher incomes. Also discussion of the implication of
low incomes on the political and social stability of a country.

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