Section A

Read the source material carefully before answering Question 1.

Source material: Will South Sudan become a more successful economy?

South Sudan fact file 2018

Population 10.6m
Population without access to electricity 0.92m
Unemployment rate 7.6%
Inflation rate 5.1%
Government budget deficit as % of GDP 10.8%

South Sudan is a lower middle-income country which relies heavily on trade with the US.
More than half of South Sudan exports go to the US and 37% of its imports come from the
US. A high number of South Sudanese work in the US and send money back home to their
relatives.
South Sudan used to concentrate on oil extraction and harvesting cotton, gaining skills and a
good reputation in those industries. Now, South Sudan produces a greater range of products
including furniture, chemicals and paper. This diversification has reduced the uncertainty
arising from sudden changes in demand and supply. For example, tariffs could be imposed
on South Sudanese oil or there could be a report stating that the demand of cotton
worldwide increases as the popularity of cotton shirts rises.
While employment is declining in oil extraction sectors, it is increasing in the furniture
industry in South Sudan. Training for workers in the furniture 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 wood, steel and other materials used to
make furniture.
A successful furniture industry has the potential to reduce poverty in South Sudan. The
South Sudan 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
$1.80 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

Chad 38.1 54
Honduras 17.3 75
Kenya 45.1 64
Lithuania 3.5 79
South Sudan 43.7 58
Sweden 0.2 83
A more successful South Sudanese 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.
Answer all parts of Question 1. Refer to the source material in your answers.

1 (a) Calculate what percentage of South Sudan people have access to electricity in
2018.
[1]

(b) Identify two benefits the South Sudanese 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 supply and demand diagram to show how an increase in the popularity of
cotton shirt would affect the market for cottons. [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 cottons in South Sudan will fall in
the future.
[6]

(h) Discuss whether or not a fall in unemployment in South Sudan 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 Living standards, including healthcare, have worsened for most people in Gambia in
recent years. Most households have less money and the government has less tax
revenue. There is, however, considerable income inequality. In 2007, 21% of the
population were living in poverty. An increase in welfare payments might reduce this
poverty.
(a) Identify one example of a direct tax and one example of an indirect tax.
[2]
(b) Explain how improved education may affect the demand for cigarettes and for
fresh fruit.
[4]
(c) Analyse the causes of a decrease in a government’s tax revenue.
[6]
(d) Discuss whether or not an increase in welfare payments would reduce poverty.

[8]

3 Hungary’s death rate is higher than some other countries, including Angola, Czech
Republic and Chile. Hungary’s labour force decreased in size between 2002 and
2018 and has become less productive. The country has also experienced high
inflation and a growing deficit 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 a decrease in the size of a country’s labour force.
[4]
(c) Analyse how a decrease in labour productivity in a country can increase a deficit
on the current account of its balance of payments.
[6]
(d) Discuss whether inflation always harms an economy
[8]
4 Many people from Thailand work in another country, often in industries that provide
merit goods and private goods. In 2017, Thailand government raised more tax
revenue. Some was spent on policy measures to reduce death rate 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 examples of private goods.
[2]
(b) Explain, with examples, the difference between a merit good and a private good.
[4]
(c) Analyse how a decrease in government spending could increase unemployment.
[6]
(d) Discuss whether or not a fall in a country’s foreign exchange rate would benefit an
economy’s current account balance of trade.
[8]

5 In Liechtenstein, 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 2015, household spending in
Liechtenstein rose. This affected some firms’ plans to merge. It also increased
employment. More than half of those unemployed in Greece had been unemployed
for more than a year.
(a) Identify two types of mergers.
[2]
(b) Explain the factors leading to a production point inside a PPC and a production
point on its PPC.
[4]
(c) Analyse how a rise in household spending reduces unemployment.
[6]
(d) Discuss whether or not the merger of many firms would benefit an economy.
[8]