0455 Economics June 2025 Question Paper 21

1 (a) Calculate the value of Gabon’s oil production as a percentage of Gabon’s GDP. [1]

(b) Identify two external benefits of rainforests. [2]

(c) Explain what effect an increase in tourism may have on Gabon’s current account of the balance of payments. [2]

(d) Explain two reasons why the Gabonese Government wants to reduce reliance on oil. [4]

(e) Draw a demand and supply diagram to show the effect of the discovery of new gold deposits on the market for gold. [4]

(f) Analyse the relationship between the literacy rate and the percentage of the labour force employed in agriculture. [5]

(g) Discuss whether or not a government should pay private sector firms to give work experience to unemployed young people. [6]

(h) Discuss whether or not a growth in the size of firms in Gabon’s textile industry will reduce their average cost of production. [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 The shape of Colombia’s population pyramid is changing. The income distribution of this South American country, however, is not changing significantly. The country has one of the most unequal income distributions in the world. Some Colombians work in its footwear industry which produces shoes, sandals and boots. Although footwear is produced in the private sector, Colombia has a mixed economic system.

(a) Define population pyramid. [2]

(b) Explain two reasons why income may become more unevenly distributed. [4]

(c) Analyse the influences on whether demand for shoes is elastic or inelastic. [6]

(d) Discuss whether or not a mixed economic system will benefit the people who live in that economy. [8]

3 In recent years, the quantity of Latvia’s factors of production has changed. Since 2008, its capital has increased and its land has not changed significantly, but its labour force and its enterprise have decreased. Enterprise and conditions of supply can affect firms’ prices. In 2022, the Latvian Government increased the country’s national minimum wage (NMW). Its NMW did, however, remain one of the lowest in the European Union.

(a) Identify the rewards to capital and land. [2]

(b) Explain two causes of a decrease in enterprise in an economy. [4]

(c) Analyse how changes in conditions of supply can affect a firm’s prices. [6]

(d) Discuss whether or not a rise in a national minimum wage will harm an economy. [8]

4 In 2023, India became the country with the largest population. This may affect the government’s macroeconomic aims. In 2018, the Indian Government cut the country’s corporation (corporate income) tax rate from 35% to 25%. Between 2019 and 2022, India’s inflation rate averaged 6%. Some economists suggested that to achieve its central inflation rate target, the government should cut its spending.

(a) Identify two macroeconomic aims of government that may conflict. [2]

(b) Explain two reasons why a country may have a high population growth rate. [4]

(c) Analyse how a cut in the corporation (corporate income) tax rate can increase economic growth. [6]

(d) Discuss whether or not a decrease in government spending will reduce inflation. [8]

5 Australia has a number of firms that operate in other countries. These multinational companies (MNCs) provide several benefits for their home country of Australia. The Australian Government imposes relatively low import tariffs and the country has a floating exchange rate. In recent years, Australia has experienced an increase in investment and a higher Human Development Index (HDI) value.

(a) Identify two benefits an MNC may provide for its home country. [2]

(b) Explain two disadvantages of import tariffs. [4]

(c) Analyse how an increase in investment can result in a rise in a country’s HDI value. [6]

(d) Discuss whether or not having a floating exchange rate benefits an economy. [8]