Download Development Past Paper Questions May

Development Questions May sessions, 2006 - 2011
Syllabus
Year, Paper
May 2006 – Paper 1
May 2006 – Paper 1 HL / SL
May 2006 – Paper 3, Q1
Question
4. (a) Explain how an
increase in the quantity
and quality of a nation’s
factors of production can
promote economic
development.
[10 marks]
4 (b) Evaluate the impact
of globalization on the
economic development of
developing countries.
[15 marks]
(c) Using a production
possibility curve diagram,
explain the impact on
economic growth of any
delay in dealing with the
HIV/AIDS epidemic in
countries such
as South Africa.
[4 marks]
Student Outline Response
• definition of factors of production
• definition of economic development
Candidates may respond to this in terms of measures of development such
as HDI etc.
• explanation of an increase in the quantity of productive factors
• the impact of an increase in the quantity of resources on productive
capacity,
economic growth and, possibly economic development
• explanation of an increase in the quality of productive factors
• the impact of specific examples of an increase in the quality of factor
inputs, e.g. the
use of improved health and education programmes, on economic
development
• reward the use of appropriate diagrams
• reward the use of appropriate growth models
A definition of globalisation
Answers may include:
• features of developing countries
• evaluate the impact of (in terms of positives and negative
– free trade
– FDI by MNCs
– liberalisation of capital markets
– greater labour mobility
– the transfer of knowledge and technology
– income and wealth inequality
– increased industrialisation and urbanisation
– greater tourism
– protection in developed countries
A PPC diagram showing an inward shift in the PPC due to a
decrease in the quantity or the quality of labour due to HIV/AIDS.
The axes must be labelled with some type of competing uses,
e.g. consumer goods and capital goods. A maximum of [3 marks]
may be awarded if the axes are inappropriately labelled.
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May 2006 – Paper 3, Q1
(d) Using information from
the text and your
knowledge of economics,
evaluate the
role of a multinational
corporation in assisting the
economic development of a
less developed economy.
[8 marks]
Answers must include:
An examination of the role of MNCs in development. Answers should not
focus on the negative alone but evaluate the benefits that MNCs can bring
as well as the problems
Items covered may include:
MNCs provide a source of
• capital
• technology
• employment
• tax revenue
• export earnings
• demand for local marketed goods
• possible multiplier effects
Further emphasis: The points above must be related to development.
For example, if tax revenue is earned, it can lead to development if the
revenues are used for developmental prospects, e.g. improved
education/literacy, redistribution of income, reduction of absolute poverty.
May retard development through
• transfer pricing
• inappropriate use and exploitation of resources
• negative externalities
• threat to sustainable development
• establishment of a dual economy/rural-urban migration/income inequality
• driving local enterprises out of business
• use of inappropriate technology
• excessive profit repatriation.
Evaluations should consider both the positive and the negative impact that
MNC’s can have in promoting development.
Possible reference to the material provided such as:
• the redistribution of resources from the developed to the less developed
economies through price discrimination
• improvement in the level of human capital through the availability of
pharmaceuticals.
Candidates who incorrectly label diagrams cannot be rewarded with full
marks.
Examiners should be aware that candidates may take a different
approach, which if appropriate should be rewarded.
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If there is no direct reference to the data, then candidates may not be
rewarded beyond Level 2.
Effective evaluation may be to:
• consider short run versus long run consequences
• examine the impact on different stakeholders
• discuss advantages and disadvantages
• prioritize the arguments
May 2006 – Paper 3, Q4
(b) Using an appropriate
diagram, explain why a
knowledge of comparative
advantage is important for
a developing country.
[4 marks]
To draw an appropriate diagram illustrating comparative advantage and an
explanation that the country should specialise in the production of the
product in which it has a lower opportunity cost and thus a comparative
advantage
May 2006 – Paper 3, Q4
(c) Using an appropriate
diagram, explain how a
knowledge of income
elasticity
of demand (YED) is useful
for exporters in a less
developed country such as
Thailand.
[4 marks]
An explanation of any plausible application of YED to developing
countries. (e.g. developing countries could produce goods that have
low income elasticity or high income elasticity depending on the
nature of the good.) A diagram showing low income elasticity
(i.e. a fairly steep upward-sloping line on a diagram with income on
the y-axis and demand on the x-axis) or high income elasticity
(a flatter line) is required to get full marks. (Candidates may draw
diagrams illustrating price elasticity of demand, but these are not
correct.)
May 2006 – Paper 3, Q5
(c) Using an appropriate
diagram, explain how the
availability of a safe water
supply may improve living
standards in less
developed countries.
[4 marks]
For drawing an appropriately labelled diagram and an explanation of how
water as a resource can encourage economic development.
May 2006 – Paper 3, Q4
(d) Using information from
the text and your
knowledge of economics,
evaluate the
Diagrams that might be used could include:
• a PPC, with the observation that the provision of safe quantity
may result in improved health and life expectancy, thus would
result in an outwards shift in the PPC
• a positive externalities diagram, showing how the provision of
safe water would result in an increase in the quantity of water
• a modified poverty cycle diagram showing how safe water may result in
higher human capital and thus higher incomes.
• a demand and supply diagram showing that if there is increased
availability of water (increase in supply), then there will be a fall in the price
of water, allowing more people to buy it.
Answers may include:
• an explanation that externalities are benefits or costs of
consumption/production, and clean water is under-provided
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externalities to be
considered in determining
whether water should be
supplied and sold by the
private sector.
[8 marks]
Although the questions refers to externalities, candidates are to be
rewarded for analysing the consequences of the provision of water by the
private sector. To reach top marks, this should include appropriate
economic analysis, rather than just description.
Positive consequences of consuming clean water:
• healthy workforce that is more productive, with greater life expectancy
• higher production, more employment, income and higher standard of
living in the long run
• saving in the costs of purifying and boiling water for human
consumption in households
• fewer water-borne illnesses
Negative consequences:
• the social and economic upheaval/inequity as a cost of implementing
the policy
• the costs of strikes and demonstrations
• regardless of the quality of the water, the price will increase, leading
to inequity.
• Profit maximising companies may be able to exploit monopoly power
and the inelasticity of demand of water to charge prices well above
marginal costs
• profit repatriation resulting from privatisation of water supply and
concessions to foreign firms.
• Larger gains for foreign firms (such as European banks, business
service firms) than for the people in developing countries
Candidates might evaluate the possibility of continued provision of water
by the public sector, which, due to insufficient financial resources would
mean that there is unlikely to be an improvement in the quality of water,
but, more people would have access to it.
Candidates who incorrectly label diagrams cannot be rewarded with
full marks.
Examiners should be aware that candidates may take a different
approach, which if appropriate should be rewarded.
If there is no direct reference to the data, then candidates may not be
rewarded beyond Level 2.
May 2007, Paper 1 HL / SL
4. (a) Explain the various
types of aid which a
developing country might
Answers may include:
definition of a developing country
definition of aid
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receive.
[10 marks]
May 2007, Paper 1 HL /SL
4 (b) “Aid is an ineffective
means of promoting the
development of poorer
countries.”
Evaluate this statement.
[15 marks]
Paper 2, May 2007
5. Distinguish between an
outward-orientated growth
strategy and an inwardorientated growth
strategy.
bilateral and multilateral aid
grant aid and loans
official and unofficial aid
tied and untied aid
debt cancellation
Answers may include:
definition of development
arguments against the statement, which may include whether aid
– bridges the savings gap
– bridges the foreign exchange gap
– finances provision of merit goods and infrastructure projects in
recipient countries
– is used as a transition strategy
arguments in favour of the statement, which may include
whether aid
– interferes with market forces and encourages reliance on
“handouts”
– is used to promote the exports of donor countries
– finances military expenditure
– is used for political purposes
– is conditional on the implementation of free market/supply side
policies
e.g. privatisation
– increases indebtedness
– is less effective than trade related development, e.g. through
fair trade schemes
Examiners should be aware that candidates may take a different
approach, which if
appropriate, should be rewarded.
Effective evaluation may be to:
consider short run versus long run consequences
examine the impact on different stakeholders
discuss advantages and disadvantages
prioritize the arguments
Answers may include:
Characteristics of outward-oriented strategies:
emphasis on comparative advantage
specialization
encouragement of free trade
emphasis on supply-side policies to improve the flexibility of
markets e.g. reduction of
regulations on labour and business
development/encouragement of markets such as capital markets
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exchange rate policies: use of floating rates
encourages Foreign Direct Investment
Characteristics of inward-oriented strategies:
emphasis on government intervention to regulate markets
import substitution
the infant industry argument
encouragement of domestic industries through constraints on
imports:
– subsidies
– tariffs
– quotas
– other regulations
exchange rate policies: use of fixed/managed rates
Paper 3, May 2007
5 (c) Identify and explain
two possible consequences
of an “ineffective taxation
structure” (paragraph 3).
[4
marks]
An explanation of the possible consequences of an ineffective
taxation
structure may include:
loss of government revenue from an inability to tax economic
activity in informal markets
inability of a government to provide merit and public goods
higher taxes charged to the formal sector to compensate for
forgone
taxes in the informal markets
increased tendency towards tax avoidance/evasion
the negative effect on income distribution due to the reliance on
indirect taxes which are regressive
an inefficient tax structure is likely to enhance the opportunity for
corruption/bribery
excessive regulatory/administrative costs – inefficiency
5 (d) Using information
from the text and your
knowledge of economics,
evaluate how
institutional and political
factors can impact upon
economic development.
[8
marks]
Institutional and political factors mentioned in the text include:
under-use of formal banking system may prevent saving
lack of property rights may inhibit entrepreneurial activity
excessive bureaucracy/red tape may increase costs of doing
business
corruption may increase costs of doing business
ineffective tax system limits ability of governments to generate
revenue.
Candidates must show an understanding of how the factors impact
upon development. Many of the points are more obviously linked
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to economic growth, so this distinction should be made.
May 2008, Paper 1, HL / SL
4. (a) Explain how
development might be
measured.
[10 marks]
Answers should include:
• definition of development
• measures of development.
The measures may include:
• use of GDP/GNP figures
• Lorentz curve and Gini coefficient as a measurement of potential
access
• alternative methods of measurement, e.g. health,
education/literacy,
quality of life, environmental indicators, stock of asset indicators,
political freedoms, composite indices, e.g. HDI.
Candidates who are able to fully explain at least two measures,
can access the
top mark band.
Examiners should be aware that candidates may take a different
approach
which if appropriate, should be rewarded.
May 2008, Paper 1 HL / SL
4 (b)
Evaluate the view that the
most effective way that a
government could improve
the welfare of its citizens is
through the pursuit of
faster economic growth.
[15 marks]
Answers may include:
• definition of growth
• explanation of the concept of welfare
• links between faster growth and welfare
• policies necessary to achieve faster growth
• implications of implementation of specific policy measures
• growth and the ability of the government to increase its
spending on welfare
enhancing programmes
• links between growth and employment
• growth and externalities
• growth and income distribution
• growth and sustainability
• possible conflicts between growth and other goals such as price
stability,
a satisfactory balance of payments, low unemployment
• possible opportunity costs
• importance of development, as opposed to growth only, in
improving
living standards
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• alternatives to economic growth e.g. policies to redistribute
income
and wealth.
Examiners should be aware that candidates may take a different
approach
which if appropriate, should be rewarded.
Effective evaluation may be to:
• consider short-term versus long-term consequences
• examine the impact on different stakeholders
• discuss advantages and disadvantages
• prioritize the arguments.
May 2008, Paper 2
6. “Indebtedness, nonconvertible currencies and
capital flight are all
significant barriers to
economic development.”
Explain two of these three
factors.
Answers may include:
• explanation of indebtedness, non-convertible currencies, capital
flight (two of them)
• explanation of economic development
• indebtedness means income may be diverted to interest and
capital repayments and may not,
therefore, be available for economic development expenditures
(i.e. development is an opportunity cost of indebtedness)
• indebtedness may inhibit access to further loans, which could be
used to facilitate economic development
• indebtedness could lead to a loss of economic freedom e.g.
through the imposition of structural
reforms by the IMF
• a non-convertible currency reduces the ability of a nation to
earn net foreign currency through
trade because the eventual gains from exports will be used to pay
for its imports
• non-convertible currencies are a deterrent for inward capital
investment
• non-convertible currencies make it difficult to import capital
goods necessary for development
• non-convertible currencies produce incentives for capital flight
• capital flight may occur due to an unstable financial system,
corruption or MNCs repatriating
profits
• capital flight reduces the tax base that could have been used for
development projects
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• capital flight creates uncertainty and lack of confidence in the
economy
• capital flight puts downward pressure on the exchange rate
• capital flight can be contagious and affect other countries.
Definitions of key economic terms alone up to [3 marks].
A maximum of [6 marks] can be awarded for an explanation of
one factor and its effect on development.
Examiners should be aware that candidates may take a different
approach which if appropriate,
should be rewarded.
Paper 3, May 2008
Paper 3, May 2008
5(a)
Define the
following terms indicated in
bold in the text:
(i) tied aid (Text box2)
(ii) infrastructure (Text
box4)
.
[2marks] [2marks]
2 Precise definition
An explanation that it is aid granted on the condition that it is
used to
buy goods or services from the donor country.
5(d) Using information
from the text and your
knowledge of economics,
evaluate the significance of
debt relief to fight poverty
in Less Developed
Countries (LDCs) in Africa.
[8 marks]
To move beyond level 2 [5 marks] students must make a link
between debt relief and poverty reduction.
2 Precise definition Any one of the following:
• physical capital typically provided by the government to make
economic activity possible
• physical capital that provides positive externalities
• essential facilities and services that add to the capital stock of
a nation.
• explanation of the term debt relief
• explanation of poverty.
Positive impacts may include:
• a reduction in the opportunity cost of debt servicing in terms of
expenditure on health, education and infrastructure, all of could
promote economic development and growth and therefore
alleviate poverty
• balance of payments effects (less debt servicing)
• bridges the savings gap and the foreign exchange gap, making
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investment in human and physical capital more likely and thereby
contributing to a reduction in poverty
• reduction in the transfer of human capital (brain drain), and the
transfer of domestic savings (capital flight), both of which can
contribute to economic development and the reduction of poverty.
Negative impacts may include:
• incompetent governments can run up more debt (Text box 1)
• corruption not likely to be eliminated
• misuse of the extra funds available (Text box 1)
• disadvantages associated with the conditions attached to debt
relief and/or tied aid.
As part of an evaluation, candidates may look at alternative
means of fighting poverty such as export-led growth (Text box 3),
the removal of protectionist policies, and “improved investment
relationships” (Text box 2).
Examiners should be aware that candidates may take a different
approach which if appropriate, should be rewarded.
Do not award more than [5 marks] if the answer does not
contain reference to the information provided.
Effective evaluation may be to:
• consider short-term versus long-term consequences
• examine the impact on different stakeholders
• discuss advantages and disadvantages
• prioritize the arguments.
May 2009, Paper 1 Q4
4. (a) Institutional and
political factors such as an
ineffective taxation
structure, political
instability and an unequal
distribution of income, as
well as social and cultural
factors such as gender
issues and tradition, may
all act as barriers to
economic development.
Explain how any three of
these factors may act as
barriers to economic
development.
[10 marks]
Answers should include:
 a definition of economic development
 a basic explanation of the significance of three of the
above as barriers to economic development e.g.:

– ineffective tax systems make it difficult to raise money
for public services
– political instability leads to civil unrest which deters FDI
– unequal distribution of income leads to poverty
– gender issues such as discrimination against women.
If a candidate uses a barrier that is not on the list above, give
credit based on the validity of the response.
Answers may include a more detailed explanation of the
significance of three of the above for economic development.
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(b)
Evaluate the view that, in
terms of achieving
economic development in
less
developed countries,
interventionist strategies,
with a role for the
government,
are preferable to marketled strategies.
[15 marks]
Answers may include:
definitions of economic development and LDCs
an explanation of interventionist strategies, e.g. in terms of the
state playing
an active role in the management of the economy,
economic planning,
import and exchange controls, nationalization of industries
an explanation of market-led strategies, e.g. in terms of a
belief in the free
operation of markets, a minimum role for the state in
economic affairs,
trade liberalization, privatization, foreign direct investment (FDI)
use of PPC diagrams to illustrate development
advantages of interventionist strategies, e.g. in terms of
greater diversity of
economic activity, supply-side improvements as a result of
investment in
health care and education and training, protectionism
allowing existing
industries breathing space to grow and infant industries to
achieve
economies of scale, a more equal distribution of income and
wealth,
less inequality between rural and urban sectors, higher levels of
employment
disadvantages of interventionist strategies in terms of possible
growth of the
public sector and government spending, inability to benefit
from the gains
from free trade, inefficient resource allocation, growth of
inefficient
monopolies, drawbacks of planning, possible bias against exports
advantages of market-led strategies, e.g. in terms of more
efficient resource
allocation along the lines of comparative advantage, benefits
of MNCs,
benefits of free trade, flexible labour and capital markets, greater
consumer
choice, a reduction in government budget deficits
disadvantages of market-led strategies, e.g. in terms of
market failure,
increased likelihood of structural unemployment, problems
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associated with
MNCs, greater wealth and income inequality, problems of capital
outflows
(e.g. profit repatriation) and a general vulnerability with regard
to external
fluctuations and shocks.
May 2009, Paper 3, Q5
(d) Using the information
from the text/data and
your knowledge of
economics,
evaluate the role of
micro-credit as an
instrument of economic
development
in Venezuela. [8
marks]
Responses may include:
 a definition of economic development
 a definition of micro-credit
 the poverty cycle may be broken
 micro-credit stimulates economic activity (paragraph
economic growth and this may lead to
economic development
 it can contribute to a reallocation of resources (paragraph
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it encourages innovation and develops new markets
it promotes a culture of entrepreneurship
it helps families generate income (paragraph
increased standards of living
it empowers women (paragraph
it reduces poverty and contributes to a more equitable
distribution of income
it rebuilds the confidence of people (paragraph
it stimulates appropriate use of technology
it is an investment in human capital (human resources)
it involves minimal state invention
it is not enough, on its own, to have a significant
impact on the economic
development of a nation (paragraph
it adds to individual debt
it is often provided at above market rates in order
for the schemes to be self-supporting
it will not succeed unless the appropriate
infrastructure is in place and
appropriate information is made available to the recipients
it arguably, does not help the “poorest of the poor” of a
nation.
Answers that make no reference to the text cannot be rewarded
beyond level 2.
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Candidates must relate the points in the answer to the
concept of economic development, as stated in the question.
May 2010, Paper 1, Question 4
4. (a) Explain the
difference between
economic growth and
economic development,
and how each of these may
be measured. [10 marks]
Answers should include:
 a definition of economic growth
 a definition of economic development
 an explanation that economic growth is a quantitative
concept whereas
 economic development is more qualitative
 an explanation that economic growth is measured by
the increase in real national income over a period of
time, whereas economic development,
 in addition to the latter, could also include a whole variety
of other measures such as schooling, life expectancy,
provision of healthcare, income distribution, political
freedoms etc. (just a few examples would suffice).
Answers may include:
 a production possibility diagram to illustrate the
difference between
 economic growth and economic development
 a mention of specific indices such as the HDI or HPI.
Examiners should be aware that candidates may take a
different approach which if appropriate, should be rewarded.
May 2010, Paper 1, Question 4
(b) Evaluate the view
that the best way that
developed countries can
help the growth
and development process
of very poor, highly
indebted countries is
through a general
cancellation of debts. [15
marks]
Answers may include:
 a definition of developing, highly indebted countries
 examples of such countries
 arguments for debt cancellation in terms of the
problems of debt
 e.g. the opportunity cost of debt repayments, the
impact on development,
 the gearing of the economy towards exports, the
potentially serious
 implications of the problem on absolute poverty
 arguments against debt cancellation, e.g. the danger
of moral hazard,
 debt forgiveness and the creation of a dependency culture,
the rewarding of
 irresponsible governments and penalizing of committed
ones, debt as one
 of just many causes of poverty in developing countries
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alternatives to debt cancellation such as aid or trade
agreements
the role of the IMF and World Bank, e.g. through
structural adjustment
programmes
an overall assessment as to how the highly indebted
countries can best be
helped: debt write-offs versus effective aid and by
industrialized countries
lifting trade barriers.
Examiners should be aware that candidates may take a
different approach
which if appropriate, should be rewarded.
Effective evaluation may be to:
consider short-term versus long-term consequences
examine the impact on different stakeholders
discuss advantages and disadvantages
prioritize the arguments.
May 2010, Paper 2, Q6
May 2010, Paper 3, Question 4
6. Explain the difference
between outward-oriented
growth strategies and
inward-oriented
growth strategies.
(d) Using information
from the text/data and
Candidates may include:
 an explanation that an outward-oriented growth
strategy relies on increasing exports as the basis of
growth, while an inward-oriented growth strategy
relies on protection and increased self-reliance
 an explanation that outward-oriented growth strategies
are based on free trade whereas inward-oriented growth
strategies are based on import substitution
 an explanation that outward-oriented growth strategies
are based on market liberalization whereas inwardoriented growth strategies based on government
intervention to regulate domestic industries and protect
infant industries
 an explanation of the advantages and disadvantages
of outward-oriented growth strategies and
 inward-oriented growth strategies.
Examiners should be aware that candidates may take a different
approach which if appropriate, should be
rewarded.
Responses may include:
 explanations of diversification and specialization.
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your knowledge of
economics,
evaluate diversiication as
a policy option for
improving export
performance
in Vietnam. [8 marks]
Arguments in favour of diversification (and against
specialization):
 avoids long-term declines in commodity terms of trade
 avoids extreme agricultural price fluctuations (paragraph
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avoids developed country barriers to trade (agricultural
subsidies)
reduces vulnerability to “shocks” such as extreme
weather conditions (paragraph
takes advantage of possibilities offered by “craft
industries” and tourism (paragraph
diversification into manufacturing provides opportunities
for increased employment, use of new technologies and
development of skills diversification allows countries to
achieve economic transformation (paragraph
over very long term must diversify into production that will
not be affected by rising sea levels (paragraph
by diversifying, countries may produce a good or
service in which they might have a comparative
advantage.
Arguments against diversification (and in favour of
specialization):
specialization according to comparative advantage
increases productive efficiency and the quantity of output
produced specialization and trade according to comparative
advantage allow countries to consume at a point outside
their PPC
specialization according to comparative advantage
improves the global allocation of resources
specialization allows countries to take advantage of
economies of scale
specialization allows farmers to take advantage of
increases in food prices
(paragraph
diversification implies structural change and so may
lead to structural
unemployment.
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