2024 Cambridge IGCSE Economics (0455) 模擬試題連答案詳解

To calculate the current account balance, we sum the balance of trade in goods, the balance of trade in services, the primary income balance, and the secondary income balance:

1. **Balance of trade in goods** = Export of goods - Import of goods = \(45\text{ billion} - 52\text{ billion} = -7\text{ billion}\)
2. **Balance of trade in services** = \(+6\text{ billion}\)
3. **Primary income balance** = \(-3\text{ billion}\)
4. **Secondary income balance** = \(+1\text{ billion}\)

**Current account balance** = \(-7\text{ billion} + 6\text{ billion} - 3\text{ billion} + 1\text{ billion} = -3\text{ billion}\).

1 mark for the correct calculation of \(-$3\text{ billion}\) (or deficit of \($3\text{ billion}\)).

Acceptable variations: -3 billion, -$3bn, -3.

Based on the provided extract, the two types of unemployment mentioned are: 1. Structural unemployment (occurring due to the decline of the coal mining industry). 2. Frictional unemployment (occurring as workers spend time searching for new jobs in cities).

Award 1 mark for each correct identification up to a maximum of 2 marks: Structural unemployment (1 mark), Frictional unemployment (1 mark). Note: Do not accept types of unemployment not stated in the extract (e.g., cyclical or seasonal unemployment).

To explain this occurrence using the extract:
1. Identify the change in imports versus exports: Spending on imported machinery increased by $120 million, which is significantly larger than the $50 million increase in export revenue from agricultural products.
2. Link this to the current account balance: Because the growth in import expenditure exceeded the growth in export revenue, the net outflow of money from the trade in goods balance increased, causing the overall current account deficit to widen.

1 mark for identifying that import spending rose by more than export revenue (or citing the specific figures: imports rose by $120 million while exports rose by $50 million).
1 mark for explaining that this creates a larger net outflow of money / worsens the trade in goods balance.

Award 1 mark for each relevant point identified from the extract/economic theory and 1 mark for each logical explanation of how it impacts tax revenue, up to a maximum of 4 marks:

* **Reduction in income tax (up to 2 marks):** High unemployment means fewer individuals are in paid employment (1 mark). As a result, total personal income falls, leading to a decrease in direct income tax revenue for the government (1 mark).
* **Reduction in indirect tax (up to 2 marks):** The extract states that unemployment leads to a fall in consumer spending (1 mark). Because consumers are buying fewer goods and services, the government receives less revenue from sales taxes or Value Added Tax (VAT) (1 mark).
* **Reduction in corporation tax (up to 2 marks):** The extract mentions a reduction in the profits of local businesses (1 mark). When business profitability falls, the government collects less revenue from corporate tax (1 mark).

Award 1 mark for each link identified (maximum 2 marks for identification) and 1 mark for each analytical explanation (maximum 2 marks for explanation):
- Identifies impact on income tax / sales tax / corporate tax (1 mark each).
- Explains the mechanism (e.g., lower wages earned, less consumption of taxed goods, lower business profits) (1 mark each).

Award 1 mark for each relevant point identified from the extract/economic theory and 1 mark for each logical explanation of how it impacts tax revenue, up to a maximum of 4 marks:

* **Reduction in income tax (up to 2 marks):** High unemployment means fewer individuals are in paid employment (1 mark). As a result, total personal income falls, leading to a decrease in direct income tax revenue for the government (1 mark).
* **Reduction in indirect tax (up to 2 marks):** The extract states that unemployment leads to a fall in consumer spending (1 mark). Because consumers are buying fewer goods and services, the government receives less revenue from sales taxes or Value Added Tax (VAT) (1 mark).
* **Reduction in corporation tax (up to 2 marks):** The extract mentions a reduction in the profits of local businesses (1 mark). When business profitability falls, the government collects less revenue from corporate tax (1 mark).

Award 1 mark for each link identified (maximum 2 marks for identification) and 1 mark for each analytical explanation (maximum 2 marks for explanation):
- Identifies impact on income tax / sales tax / corporate tax (1 mark each).
- Explains the mechanism (e.g., lower wages earned, less consumption of taxed goods, lower business profits) (1 mark each).

To calculate the current account balance, we sum the balances of its four main components: 1. Balance of trade in goods = Export of goods - Import of goods = $45bn - $52bn = -$7 billion. 2. Balance of trade in services = Export of services - Import of services = $28bn - $18bn = +$10 billion. 3. Net primary income = Income inflows - Income outflows = $5bn - $8bn = -$3 billion. 4. Net secondary income = -$2 billion. Current account balance = (-$7bn) + (+$10bn) + (-$3bn) + (-$2bn) = -$2 billion (or a deficit of $2 billion).

Award marks as follows: 1 mark for calculating the Balance of Trade in Goods (-$7 billion) or Balance of Trade in Services (+$10 billion). 1 mark for calculating the Net Primary Income (-$3 billion). 1 mark for showing a correct method of summing all four components (Goods Balance + Services Balance + Net Primary Income + Net Secondary Income). 1 mark for the correct final answer of -$2 billion or a deficit of $2 billion (must include unit 'billion' and currency '$' or 'dollars').

**Diagrammatic Analysis:**

1. **Diagram Description:**
- **Axes:** The vertical axis should be labelled 'Price' (P) and the horizontal axis labelled 'Quantity' (Q).
- **Original Curves:** An initial downward-sloping demand curve (D1) and an upward-sloping supply curve (S) intersect to establish the initial equilibrium price (P1) and quantity (Q1).
- **Shift:** The demand curve for municipal bus travel shifts to the right from D1 to D2.
- **New Equilibrium:** The new intersection of D2 and S establishes a higher equilibrium price (P2) and a higher equilibrium quantity (Q2).

2. **Economic Analysis:**
- Private car travel and municipal bus travel are substitute goods.
- When the cost of private car travel increases, it becomes relatively more expensive to drive.
- This causes commuters to switch their preference toward the cheaper alternative, which is municipal bus travel.
- Consequently, the demand for municipal bus travel increases (shifts to the right), driving up both its market price and the quantity traded.

**Diagram [3 marks]:**
- **1 mark** for correctly labelled axes (Price and Quantity) and initial demand and supply curves showing original equilibrium.
- **1 mark** for shifting the demand curve to the right.
- **1 mark** for showing a higher equilibrium price and a higher equilibrium quantity.

**Written Analysis [2 marks]:**
- **1 mark** for identifying that private car travel and municipal bus travel are substitute goods (or that commuters switch from cars to buses).
- **1 mark** for explaining that the shift in demand increases both the equilibrium price and quantity of municipal bus travel.

Arguments that a reduction in unemployment always benefits an economy:
- **Economic Growth**: More people employed means more labor is being used, increasing total output (GDP) and shifting the economy closer to its productive capacity.
- **Living Standards**: Household incomes rise as people move from unemployment benefits to wages, reducing poverty and improving well-being.
- **Government Budget**: The government receives more tax revenue (e.g., income tax and indirect taxes like VAT) and spends less on unemployment welfare, freeing up funds for public services or reducing national debt.

Arguments that a reduction in unemployment may not always benefit an economy:
- **Inflationary Pressures**: Low unemployment can lead to labor shortages. Firms must compete for scarce workers by offering higher wages, leading to cost-push inflation. Additionally, higher overall household income boosts aggregate demand, potentially causing demand-pull inflation.
- **Current Account Deficit**: Higher disposable incomes often lead to increased spending on imported consumer goods, which can worsen the current account of the balance of payments.
- **Inefficiency and Mismatch**: If the fall in unemployment is driven by temporary government infrastructure projects, it may lead to structural unemployment once the projects end. Firms may also have to employ less productive workers, lowering average labor productivity.

Award up to 4 marks for a one-sided discussion.
Award up to 6 marks for a balanced discussion of both sides.

**Arguments for benefits (up to 3 marks):**
- **1 mark** for identifying/explaining that higher employment increases GDP / economic growth.
- **1 mark** for identifying/explaining that it leads to higher incomes / higher living standards / reduced poverty.
- **1 mark** for identifying/explaining that government tax revenue increases / welfare spending falls.

**Arguments for why it may not always benefit (up to 3 marks):**
- **1 mark** for identifying/explaining that labor shortages can lead to wage-price spirals / cost-push inflation.
- **1 mark** for identifying/explaining that increased demand can cause demand-pull inflation.
- **1 mark** for identifying/explaining that a rise in consumer spending can increase imports and worsen the current account balance.
- **1 mark** for identifying/explaining that it may lead to lower average labor productivity if less skilled workers are hired, or structural unemployment if the jobs are temporary.

Arguments that a widening current account deficit is harmful:
- **Foreign Debt Accumulation**: A persistent deficit must be financed by borrowing from abroad or by selling domestic assets. This increases foreign debt and the future burden of interest payments.
- **Currency Depreciation**: A trade deficit means more supply of the domestic currency on foreign exchange markets (to buy imports) than demand for it, which can cause the exchange rate to depreciate, making imports more expensive and potentially causing inflation.
- **Loss of Competitiveness**: It may indicate that domestic firms are uncompetitive compared to foreign producers, leading to domestic job losses in manufacturing and export sectors.

Arguments that a widening current account deficit is not always harmful:
- **Import of Capital Goods**: As in Country Y's case, if the deficit is caused by importing machinery, technology, and capital goods, it will expand the country's productive capacity (shifting the PPC outwards) and increase future exports and GDP growth.
- **Economic Growth and Living Standards**: A deficit can be a sign of a fast-growing economy where domestic demand is strong and households enjoy higher standards of living by consuming foreign goods.
- **Financeability**: If the deficit is financed by long-term foreign direct investment (FDI) rather than short-term debt, it is less risky and can help develop domestic industries.

Award up to 4 marks for a one-sided discussion.
Award up to 6 marks for a balanced discussion of both sides.

**Arguments for why it is harmful (up to 3 marks):**
- **1 mark** for identifying/explaining that it leads to an accumulation of foreign debt / interest payments.
- **1 mark** for identifying/explaining that it can cause depreciation of the currency, leading to imported inflation.
- **1 mark** for identifying/explaining that it may signal a loss of international competitiveness, threatening domestic employment.

**Arguments for why it is not always harmful (up to 3 marks):**
- **1 mark** for identifying/explaining that importing capital goods (such as railway equipment/machinery) improves future productive capacity and economic growth.
- **1 mark** for identifying/explaining that it may simply reflect high domestic consumer demand and rising living standards in a booming economy.
- **1 mark** for identifying/explaining that if financed by stable long-term capital inflows (like FDI), it does not create immediate debt problems.

Cyclical unemployment (also known as demand-deficient unemployment) occurs when there is a general downturn in the business cycle, leading to a fall in aggregate demand. As aggregate demand declines, firms cut back on production and require fewer workers, leading to layoffs.

Award 1 mark for identifying that it is caused by a fall in aggregate demand / total spending. Award 1 mark for linking it to a recession, economic downturn, or contraction in the business cycle.

The current account of the balance of payments is an economic record of a nation's international transactions. It is composed of the balance of trade in goods, the balance of trade in services, primary income (such as wages and investment income), and secondary income (such as international aid and remittances).

Award 1 mark for stating it records trade in goods and services (or visible and invisible trade). Award 1 mark for mentioning primary income, secondary income, or current transfers.

A tariff is a protectionist policy tool. It is a tax or duty levied on goods and services entering a country from abroad, designed to raise their prices and protect domestic producers from foreign competition.

Award 1 mark for stating that it is a tax or duty. Award 1 mark for stating that it is placed on imported goods/services.

First, structural unemployment is long-term and arises from a structural decline in an industry, which leaves workers with obsolete skills. In contrast, frictional unemployment is short-term as workers voluntarily move between jobs. Second, structural unemployment results in a persistent waste of resources (unused labor capacity) and causes long-term economic scarring/poverty, requiring costly government spending on retraining programs, whereas frictional unemployment resolves itself quickly without significant government intervention.

1 mark for identifying that structural unemployment is long-term/persistent while frictional is short-term. 1 mark for explaining that structural workers suffer from a skills mismatch or occupational immobility. 1 mark for identifying that structural unemployment requires expensive government intervention (e.g., retraining programs). 1 mark for explaining that frictional unemployment represents a healthy functioning labor market that resolves itself without significant cost.

An import tariff is a tax placed on goods imported from abroad, which increases their retail price in the domestic market. This makes domestic substitutes relatively cheaper and more attractive, causing consumers to switch their spending from foreign imports to domestic goods. Consequently, demand for domestic products increases, prompting domestic firms to expand their output. Because the demand for labor is a derived demand, these domestic firms will hire more workers or retain existing ones, thereby protecting domestic employment.

1 mark for explaining that a tariff increases the price of foreign imports. 1 mark for explaining that consumers switch demand to domestic products. 1 mark for explaining that this leads to an increase in domestic production/output. 1 mark for explaining that because labor is a derived demand, firms maintain or increase employment.

A high rate of domestic inflation relative to foreign countries makes domestic goods and services more expensive on international markets, reducing their price competitiveness. As a result, demand for the country's exports falls, leading to a reduction in export revenue. Simultaneously, foreign imports become relatively cheaper than domestically produced goods, causing domestic consumers to buy more imports, which increases import expenditure. The combination of falling export revenue and rising import expenditure worsens the trade balance, leading to a deficit on the current account.

1 mark for explaining that high inflation reduces the price competitiveness of domestic exports. 1 mark for explaining that this leads to lower demand for exports and a decline in export revenue. 1 mark for explaining that imports become relatively cheaper for domestic consumers. 1 mark for explaining that this increases import expenditure, resulting in a current account deficit/worsening trade balance.

A rise in interest rates increases the cost of borrowing for both households and firms, while also increasing the incentive to save. This leads to a reduction in household consumption, particularly on big-ticket items bought on credit, and causes firms to postpone investment projects. As a result, aggregate demand in the economy falls. Facing lower sales and revenue, firms reduce their output. Since the demand for labour is a derived demand (dependent on the demand for goods and services), firms need fewer workers to produce this lower output. To reduce costs, they make workers redundant or freeze new hiring, which increases the level of cyclical (demand-deficient) unemployment in the economy.

Up to 6 marks for a coherent, logical chain of analysis: - Explaining that a rise in interest rates increases the cost of borrowing and/or the incentive to save (1 mark). - Explaining how this reduces consumer spending/expenditure (1 mark). - Explaining how this reduces business investment (1 mark). - Linking these reductions to a decrease in aggregate demand/total demand in the economy (1 mark). - Explaining that the demand for labour is a derived demand (1 mark). - Analysing how lower demand leads firms to cut output and lay off workers, causing cyclical unemployment (1 mark).

An import tariff is a tax imposed by a government on foreign-produced goods entering the country. When a tariff is applied, it increases the cost of importing, which raises the retail price of these foreign goods for domestic consumers. This price increase makes domestic goods relatively cheaper and more price-competitive. Consequently, consumers switch their spending away from imports and towards domestic products. The resulting increase in demand leads to higher sales and revenues for domestic firms. This allows them to expand their scale of production, achieve internal economies of scale, and lower their average costs. Over time, these domestic firms can become efficient enough to compete with foreign producers on their own.

Up to 6 marks for a coherent, logical chain of analysis: - Defining/explaining a tariff as a tax on imports (1 mark). - Explaining that tariffs raise the price of imported goods (1 mark). - Analysing how this makes domestic products relatively cheaper/more competitive (1 mark). - Explaining that consumers switch demand from imports to domestic alternatives (1 mark). - Analysing how increased demand leads to higher sales/revenue for domestic firms (1 mark). - Explaining how this allows domestic firms to expand, achieve economies of scale, and reduce average costs (1 mark).

A depreciation of a country's currency means its value falls relative to other currencies. This makes exports cheaper in terms of foreign currencies, increasing the price competitiveness of domestic goods abroad. As a result, foreign demand for exports rises, increasing export volume and, if demand is price-elastic, export earnings. Conversely, a weaker currency makes imports more expensive in terms of the domestic currency. This discourages domestic consumers and firms from buying imported goods, leading to a fall in import volume and, if demand is price-elastic, a fall in total import expenditure. The combination of increased export revenue and decreased import spending reduces a current account deficit or increases a current account surplus, thus improving the current account balance.

Up to 6 marks for a coherent, logical chain of analysis: - Explaining that currency depreciation means a fall in the value of the domestic currency (1 mark). - Explaining that this makes exports cheaper for foreign buyers (1 mark). - Analysing how this leads to an increase in export volume and revenue (1 mark). - Explaining that imports become more expensive for domestic buyers (1 mark). - Analysing how this leads to a reduction in import volume and expenditure (1 mark). - Concluding that the current account balance improves because export earnings increase relative to import spending (1 mark).

A high rate of unemployment is generally considered a major macroeconomic problem, but its effects can vary.

Why a high rate of unemployment is harmful:
- **Lost Output/GDP**: The economy is not operating at full capacity. It is producing inside its production possibility curve (PPC), representing a waste of scarce resources.
- **Government Budget Pressure**: The government receives less revenue from income tax (direct tax) and indirect taxes (VAT/GST) because consumer spending falls. Simultaneously, government expenditure on unemployment benefits and social welfare increases, which may lead to a budget deficit or opportunity cost in public services.
- **Lower Living Standards and Poverty**: Unemployed individuals lose their source of income, leading to reduced material living standards, stress, and potential long-term skill deterioration (hysteresis).

Why a high rate of unemployment may not always be completely harmful, or has alternative aspects:
- **Frictional Unemployment**: A small amount of unemployment can be beneficial if it is frictional (workers searching for better jobs). This allows a more efficient allocation of labor in the long run, improving overall labor productivity.
- **Inflation Control**: High unemployment reduces total aggregate demand. This can help lower demand-pull inflation and reduce pressure on wage demands (cost-push inflation), making exports more price-competitive.
- **Incentive for Retraining**: Structural unemployment might force workers to acquire new, highly demanded skills, which ultimately benefits the economy's long-term growth and transition towards modern industries.

**Level 3 (6–8 marks)**:
- Discusses both sides of the argument, showing a balanced and logical analysis with appropriate economic terms.
- Explains clearly why a high rate of unemployment is harmful (e.g., lost GDP, fiscal deficit, fall in living standards) AND why it might not be entirely harmful (e.g., frictional search, reducing inflation, restructuring opportunities).

**Level 2 (3–5 marks)**:
- Explains only one side of the argument (e.g., only why unemployment is harmful).
- Or provides a weak, undeveloped explanation of both sides.

**Level 1 (1–2 marks)**:
- Identifies points (e.g., 'unemployed people have less money' or 'the government pays benefits') but does not develop them.
- Displays limited economic understanding.

The imposition of tariffs is a protectionist measure designed to shield domestic producers from foreign competition.

Why tariffs will benefit domestic industries:
- **Price Advantage**: Tariffs increase the price of imported goods, making domestic alternatives relatively cheaper. This increases demand for domestic products, boosting domestic revenue, profits, and market share.
- **Employment Protection**: Higher demand for domestic output can save jobs in those industries, preventing structural unemployment.
- **Infant Industry Protection**: Newly established domestic firms (infant industries) are protected from larger, more established foreign competitors, allowing them time to achieve economies of scale and become internationally competitive.

Why tariffs may not benefit or may harm domestic industries:
- **Higher Cost of Inputs**: Many domestic manufacturers import raw materials, components, or capital equipment. Tariffs on these imports increase production costs, reducing the competitiveness and profitability of these domestic firms.
- **Retaliation**: Trading partners may retaliate by imposing their own tariffs. This severely harms domestic export-oriented industries, who will face reduced demand abroad.
- **Incentive for Inefficiency**: By shielding domestic firms from foreign competition, tariffs can remove the incentive to innovate, reduce costs, or improve quality, leading to long-term economic inefficiency.

**Level 3 (6–8 marks)**:
- Discusses both sides of the argument, showing a balanced and logical analysis with appropriate economic terms.
- Explains clearly how tariffs benefit domestic industries (price advantage, job preservation, infant industry support) AND how they can harm domestic industries (higher input costs, risk of foreign retaliation, long-term inefficiency).

**Level 2 (3–5 marks)**:
- Explains only one side of the argument (e.g., only the benefits of protectionism).
- Or provides a weak, undeveloped explanation of both sides.

**Level 1 (1–2 marks)**:
- Identifies points (e.g., 'tariffs make imports dearer' or 'other countries will get angry') but does not develop them.
- Displays limited economic understanding.

A current account deficit occurs when a country spends more on foreign goods and services than it earns from its exports and other current transfers.

Why a current account deficit is a major economic problem:
- **Exchange Rate Depreciation**: A persistent deficit means supply of the currency exceeds demand in foreign exchange markets, which can cause the exchange rate to depreciate, leading to imported inflation.
- **Debt and Unsustainability**: If financed by borrowing from abroad, the country builds up foreign debt, which requires interest payments (making future current accounts worse) and may lead to a sudden loss of investor confidence.
- **Loss of Competitiveness**: A persistent deficit may indicate that domestic industries are structurally uncompetitive due to high inflation, low productivity, or poor quality goods.

Why a current account deficit is not always a major economic problem:
- **Importing Capital Goods**: If the deficit is driven by importing machinery, technology, or capital equipment, it will expand the country's productive capacity (shifting the PPC outwards) and increase future export potential.
- **FDI Inflows**: If the current account deficit is matched by an inflow of foreign direct investment (FDI) on the financial account, it shows foreign confidence in the domestic economy and does not create debt.
- **Short-term Fluctuation**: It might be a temporary deficit due to a cyclical downturn in trading partners or a temporary spike in the price of key imported resources (e.g., oil), which will self-correct over time.

**Level 3 (6–8 marks)**:
- Discusses both sides of the argument, showing a balanced and logical analysis with appropriate economic terms.
- Explains why a deficit is a major problem (depreciation, external debt, structural uncompetitiveness) AND why it may not be a major problem (investment-driven, financed by FDI, short-term).

**Level 2 (3–5 marks)**:
- Explains only one side of the argument (e.g., only why a deficit is harmful).
- Or provides a weak, undeveloped explanation of both sides.

**Level 1 (1–2 marks)**:
- Identifies points (e.g., 'more imports than exports' or 'the country is in debt') but does not develop them.
- Displays limited economic understanding.