0455/22/F/M/24

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]
Two from:
• high income / high living standards/less risk of poverty
• good job
• wide range of interests
0455/21/M/J/22
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.
d) Discuss whether or not the use of supply-side policy measures will reduce unemployment.[8]
Why it might:
• education and training can improve the skills of workers, making them more attractive to
employers
• education and training can increase mobility of workers, reducing structural unemployment
• lower income tax / lower unemployment benefit can increase the incentive to work / reduce
voluntary unemployment
• privatisation and deregulation may make firms more competitive, may expand and employ
more workers
• Subsidies to employ more workers e.g., furlough schemes.
Why it might not:
• education and training may be in the wrong areas
• measures can take a long time to have an effect
• privatisation and deregulation may result in a reduction in output and employment
• supply-side policy will not reduce cyclical unemployment
• cut in unemployment benefit may increase unemployment by reducing total demand.

0455/22/F/M/21
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.
c) Analyse how a central bank could reduce inflation. [6]
Coherent analysis which might include:
A central bank could use contractionary monetary policy (1).
A central bank could increase the rate of interest (1) increase saving (1) reduce borrowing (1)
reduce consumer expenditure (1) reduce total (aggregate) demand (1) reduce demand-pull
inflation (1).
A central bank could reduce the money supply (1) print less money / sell government bonds (1)
restrict bank lending (1) fewer loans may reduce investment (1) reduce consumer expenditure
(1).
Raising the exchange rate (1) may reduce the price of imports (1) lowering cost-push inflation
(1).
One effect of a lower interest rate might be to lower costs of production (1) reduce cost-push
inflation (1)
0455/23/O/N/20
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]

The removal of rules/regulation (2).
Less government intervention (1) to encourage competition (1).
Actions making it easier for businesses to enter / operate in an industry (1).
Supply-side policy (1) to increase competition (1).

b) Analyse how education and subsidies can increase a country’s economic growth rate. [6]
Education/training may increase qualifications/skills (1) raising the productivity of workers (1)
increasing the mobility of workers (1) attracts MNCs (1) reduces unemployment (1) raising the
quality (1) and quantity of output (1).
Subsidies will lower firms’ costs of production (1) encouraging firms to increase their production
(1) increasing supply (1) lowering price (1) a higher output is likely to be bought and sold (1).
Subsidies for consumers e.g. education/health (1) may help in gaining skills/jobs and being more
productive (1)
0455/21/O/N/20
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.
d) Discuss whether or not supply-side policy measures can reduce unemployment. [8]
Why they can:
• decrease corporation / profit tax, more profits, more investments, more demand for labour,
reduction in cyclical unemployment
• decrease interest rates, more borrowing, more investment, more demand for labour, reduction in
cyclical unemployment
• decrease income tax, increase disposable income, more spending / demand for goods and
services, more production, increase demand for labour
• government subsidies can encourage firms to expand and take on more workers, reduce cyclical
unemployment
• increase spending on education and training, increase skills / productivity of labour, increase
demand for labour, decrease structural unemployment.
• provide more information on jobs / job centres, easier for workers to find jobs, decrease
frictional unemployment
• reduce unemployment benefit to reduce the time workers are between jobs, decrease frictional
unemployment.
Why they cannot:
• may be a time lag
• more investments could lead to increased technological development, less demand for workers
• education programmes not according to market needs
0455/23/M/J/18
In early 2016, the central bank of the Republic of Turkey cut interest rates five times. This was
despite an inflation rate of 7.6%. The economy had a combination of a low saving rate and weak
investment. To stimulate economic growth the Turkish government announced a package of
reforms including subsidies for research and investment.
d) Discuss the impact of supply-side policy measures on government expenditure and on
government revenue. [8]
Up to 5 marks for why it might increase government expenditure and decrease tax revenue:
Policies such as subsidies may be expensive (1) if funded through borrowing government
spending on interest payments will increase (1) gains from supply side policies take a long time
to materialise (1) meaning in the short run there may be no increase in tax revenue (1).
Cut in income tax (1) may decrease income tax revenue in short run (1).
Cut in corporation tax (1) may decrease corporation tax revenue in short run (1).
Privatisation in the long run may reduce government revenue (1) if privatised firms have been
profitable (1)