INTERNAL EXAMINATIONS

International General Certificate for Secondary Education

Terminal Examination December 2021 (IGCSE-III)

Candidate
Name

Centre Candidate
Number Number

Branch: ___________________________ Date: ______________________

Economics 0455
Dec 2021

2 hours 15 min
Additional Material: Answer Sheet Total marks:90

READ THESE INSTRUCTIONS FIRST

Write your Centre number, candidate number and name on FOR EXAMINER’S USE
all the work you hand in. Max. Marks
Questions
Marks Obtained
Write in dark blue or black pen.
You may use an HB pencil for any diagrams or rough working. 1 30
Do not use staples, paper clips, highlighters and glue or 2 60
correction fluid.
Total 90
Answer all the questions. Percentage
Grade
At the end of the examination, fasten all your work securely
together.
The number of marks are given in brackets [ ] at the end of
each question or part question.

This document consists of 4 printed pages

[TURN OVER]
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Section A

Read the source material carefully before answering Question 1.

Source material: The destruction of forests in Indonesia

Indonesia is the world’s largest producer of palm oil. The costs involved in producing palm oil include
rent of land, fertiliser, palm oil seeds, maintenance of irrigation systems and casual labour. Fires are set
to clear forests to make way for palm oil plantations. These fires destroy the homes of many species of
wildlife and release harmful gases into the air. Since 2011, Indonesia has been paid to conserve its
forests by the Norwegian government.
While Indonesia is the largest producer of palm oil, it is the third largest producer of rice. Indonesia
exports 85% of its palm oil but sometimes has to import rice to meet domestic demand. Its
international trade in palm oil and rice is influenced by changes in its foreign exchange rate. The price
of the Indonesian currency, the rupiah, fell in 2017. Rice production also contributes to air pollution.
Rice farmers burn the stubble left after harvesting to clear the fields and to raise the fertility of the
land so they can produce more rice. Some environmentalists argue that stubble burning should be
banned. The Indonesian economy, along with the world economy, continues to grow. Economic
growth can cause pollution. It can also affect a country’s GDP per head ranking and Human
Development Index (HDI) ranking as shown in Table 1.1.
Table 1.1 GDP per head ranking and HDI ranking for selected countries in 2016

Indonesia experiences net emigration. Some Indonesians work abroad and send money home to their
families. People also come from abroad to work in Indonesia, some in relatively highly paid jobs in the
country’s expanding tourism industry. Indonesia currently attracts fewer tourists than its neighbours,
Singapore and Malaysia. It does, however, have many natural tourist attractions and is currently price
competitive.
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Answer all parts of Question 1. Refer to the source material in your answers.
1 (a) Calculate the percentage of total world output of palm oil produced by Indonesia in 2017. [1]

(b) Identify two variable costs of producing palm oil. [2]

(c) Explain one opportunity cost of conserving forests in Indonesia. [2]

(d) Explain how demand pull inflation is differ from cost push inflation. [4]

(e) Draw a demand and supply diagram to show the effect of a ban on burning stubble on the market
for rice. [4]

(f) Analyse the relationship between countries’ GDP per head ranking and HDI ranking. [5]

(g) Discuss whether or not the immigration of workers would be likely to benefit the Indonesian
economy. [6]

(h) Discuss whether or not unemployment benefits will improves living standards. [6]
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Section B
Answer any three questions.
It was announced in November 2016 that 500 and 1000 rupee banknotes could no longer be used in
shops in India. These were replaced by the central bank, an institution that makes extensive use of
division of labour. In India, cash is still an important form of money used in economic transactions.
The replacement of banknotes put pressure on banking staff and other workers in the tertiary sector,
and affected the general price level.

(a) Identify two characteristics of a developed country. [2]

(b) Explain two reasons why workers in the tertiary sector may be paid more than workers in the
primary sector. [4]

(c) Analyse how a fall in unemployment may increase inflation. [6]

(d) Discuss whether or not deflation will benefit an economy. [8]

Ireland has one of the lowest rates of corporation tax in Europe. This has encouraged many
multinational companies (MNCs) to produce in Ireland. Other reasons why firms want to produce in
Ireland include access to freer trade with other European countries, higher labour productivity and
government grants.

(a) Define absolute poverty. [2]

(b) Explain two causes of a fall in the death rate. [4]

(c) Analyse two internal diseconomies of scale that a large firm may experience. [6]

(d) Discuss whether or not MNCs always benefit their host countries. [8]
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More agricultural markets come close to perfect competition than markets for manufactured goods
and for services. The goals of business organizations can vary between markets, and within markets.
In 2017, the Nigerian government used supply-side policy measures to influence the goals and
performance of firms in a range of markets and to lower firms’ average costs of production.

(a) Define fixed cost [2]

(b) Explain two goals a business organization may have. [4]

(c) Analyze the advantages of a low rate of inflation. [6]

(d) Discuss whether GDP per head is the better measure to calculate the standard of living [8]

Global spending on the health sector, by both the private and public sectors, is the highest compared
with all other sectors including education and defence. Investment in education and the health
sector has resulted in new life-saving technology being introduced. However, demand for certain
vaccinations has decreased over the years, shifting the demand curve of vaccinations to the left.

(a) Define Supply. [2]

(b) Explain two causes of a shift of a product’s demand curve to the left. [4]

(c) Analyze, using a production possibility curve diagram (PPC), the effect of increased investment in
both education and the health sector. [6]

(d) Discuss the causes of difference in economic development between countries. [8]