0455 Economics June 2025 Question Paper 22

1 (a) Calculate St. Kitts and Nevis’s government budget deficit in 2022. [1]

(b) Identify two examples of the factor of production ‘land’ in St. Kitts and Nevis. [2]

(c) Explain how tourism causes external costs in St. Kitts and Nevis. [2]

(d) Explain two reasons why a foreign bank may open a branch in St. Kitts and Nevis. [4]

(e) Draw a demand and supply diagram to show the effect of an increase in the productivity of onion farmers on the market for onions. [4]

(f) Analyse the relationship between healthcare spending as a percentage of GDP and life expectancy. [5]

(g) Discuss whether or not an increase in the size of its fishing industry would benefit St. Kitts and Nevis. [6]

(h) Discuss whether or not deflation is likely to have harmed St. Kitts and Nevis. [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 world’s four largest accountancy firms experienced a decline in demand for their services at the start of 2023. One cause of this lower demand was a decline in mergers in other industries, including the chocolate industry. Three of the accountancy firms reduced the number of new workers they hired and the other accountancy firm announced job losses. The ability of workers to gain new jobs is influenced by their mobility.

(a) Identify two advantages a firm may gain from merging with another firm. [2]

(b) Explain two disadvantages workers may experience as a result of losing their jobs. [4]

(c) Analyse the advantages of an increase in labour mobility. [6]

(d) Discuss whether or not the demand for chocolate is likely to be price elastic. [8]

3 In 2022, Paraguay’s production possibility curve (PPC) shifted to the right. Paraguay has a mixed economic system. Its government provides merit goods and public goods. The country’s private sector is a major producer of shampoo. The firms in the shampoo industry make use of division of labour. There are several firms in the industry, but the number is declining. There is a possibility that soon there may be just one firm in the industry.

(a) Identify what is measured on the axes of a production possibility curve. [2]

(b) Explain, with an example of each, the difference between a merit good and a public good. [4]

(c) Analyse how division of labour can benefit firms. [6]

(d) Discuss whether or not consumers would benefit from only one firm producing shampoo. [8]

4 In 2022, more than a quarter of a million workers, including doctors, left Sri Lanka to work in other countries. This was largely due to economic problems, including an inflation rate of 50% and a concern that unemployment might rise. The Sri Lankan Government increased direct taxation. It also encouraged some public sector workers to work abroad temporarily. People who work abroad often send money home to relatives.

(a) Identify two types of unemployment. [2]

(b) Explain two ways that money received from relatives working abroad could raise their families’ living standards. [4]

(c) Analyse how an increase in direct taxation could increase unemployment. [6]

(d) Discuss whether or not a doctor would benefit from working in another country. [8]

5 In 2023, the Chinese Government said that it would aim for an economic growth rate of 5% and a steady increase in both exports and imports. It was expected that higher output would be caused mainly by an increase in household spending, although this could also result in inflation. Another aim of the Chinese Government was to keep the unemployment rate at around 5.5%. China has an ageing population and an ageing labour force.

(a) Identify two influences on household spending. [2]

(b) Explain two advantages of employing older workers. [4]

(c) Analyse how an increase in household spending could cause inflation. [6]

(d) Discuss whether or not a government should aim for an increase in imports. [8]