IBDP Economics SL – The global economy – Measuring development -Paper 2 Exam Style Practice Questions
Measuring development Paper 2?
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Exam Style Question for Measuring development -Paper 2
Burundi
- Burundi is a small landlocked African country. Densely populated, it has a population of approximately 10.6 million inhabitants. The economy is dominated by subsistence agriculture, which employs 90 % of the population, though cultivatable land is extremely scarce. More than a decade of conflict led to the destruction of much of the country’s physical, social and human capital. However, substantial improvements have occurred since the conflict ended in 2006, thanks largely to the success of measures implemented to reduce the excessive control of the military.
- Even though Burundi is enjoying its first decade of sustained economic growth, poverty remains widespread. Burundi’s ranking on the Human Development Index (HDI) increased by 2.5 % per year between 2005 and 2013 as education and health outcomes have significantly improved over the period, yet the country still ranks low at 180th out of 187 countries in 2013. Per capita gross national income more than doubled between 2005 (US\($\)130) and 2013 (US\($\)280).
- Burundi is making the transition from a post-conflict economy to a stable and growing economy. Economic reforms and institution building are ongoing. After significant improvements to achieve peace and security, the country’s development program is shifting gradually towards modernizing public finance. However, the government has limited “fiscal space” because tax collection is very hard to carry out and tax receipts are low.
- With its limited resources, the government is attempting to strengthen basic social services and upgrade infrastructure and institutions, particularly in the energy, mining, and agricultural sectors. This has been accompanied by increasing participation of the private sector. The goal now is to grow a more stable, competitive and diversified economy with enhanced opportunities for employment and improved standards of living.
- Over the last decade, annual economic growth in Burundi has been between 4 % and 5 %. Inflation continues to decline reaching 3.9% in July 2016, down from 24% in March 2012, reflecting a careful monetary policy helped by a recent decrease in the prices of imports, especially oil, which is an essential commodity.
- Burundi’s main exports are agricultural; coffee and tea account for 90 % of foreign exchange earnings, and exports are a relatively small share of Gross Domestic Product (GDP).
Question
List two components of the Human Development Index (HDI) (paragraph [2]).
▶️Answer/Explanation
Any two of the following measures:
- life expectancy (at birth)
- mean years of schooling (for those aged 25 years and above)
- expected years of schooling (for a child of school entrance age, capped at 18 years of age)
- GNI per capita (or GDP per capita).
Text D — Overview of Sierra Leone
- Sierra Leone is located on the west coast of Africa. Economic activity is concentrated on agriculture and mining, which together contribute 70 % of gross domestic product (GDP) and 77 % of export revenue.
- Economic growth rates fluctuated from +20.1 % in 2013 to −21.5 % in 2015. The economic slowdown in China contributed to a significant drop in mining activities and a fall in Sierra Leone’s export revenue. China is Sierra Leone’s largest market for exported minerals.
- Economic growth rates in Sierra Leone have improved in recent years due to increased activity in agriculture, mining and construction. Increased employment in these labour-intensive sectors could help reduce poverty, which remains widespread in the country. Sierra Leone’s ranking in the Inequality adjusted Human Development Index (IHDI) is very low.
- The fall in export revenue has led to a 50 % depreciation of the leone (Sierra Leone’s currency) over the past five years. Even recent increases in the price of commodities have not been sufficient to offset the high import expenditure on food, medication, cars and capital equipment.
- The depreciation of the leone has led to inflationary pressures. The removal of a fuel subsidy resulted in an increase in the price of fuel and pushed the inflation rate from 16.8 % in 2018 to 17.2 % in 2019.
- To make matters worse, access to essential, life-saving health care services in Sierra Leone is often disrupted by regional conflicts. Healthcare in Sierra Leone is generally charged for and is provided by a mixture of government, private and non-governmental organizations (NGOs). NGOs are relied on to protect the health and wellbeing of citizens. NGOs help to achieve this by distributing medicine and teaching families about hygiene and proper sanitation.
- Another area of concern is the government debt, which stood at 62 % of GDP in 2019. The government has reduced its budget deficit from 5.7 % to 3.4 % of GDP by minimizing non-payment of taxes and implementing cost-saving measures such as the automation of some government services.
- The newly elected government has made good progress in its fight against corruption, but it is facing many macroeconomic challenges. Foreign aid has been reduced, infrastructure is inadequate and many economic activities remain untaxed. Youth unemployment is also high due to low literacy rates and a lack of skills required in the job market.
Text E — Sierra Leone’s new development plan
- In 2019, the government of Sierra Leone introduced a new five-year development plan. The plan includes policies aimed at increasing the welfare of Sierra Leone’s citizens by working towards the Sustainable Development Goals.
- The development plan ensures access to free primary and secondary education in all public schools. The cost of education is the main reason that many households are not sending their children, particularly girls, to school. For those paying private education fees, switching to public education would allow more of their household income to be spent on other essential services and farming equipment.
- The expected increase in human capital should facilitate economic activities and lead to investment. Schools now teach modern farming practices, such as those involving the use of farm machinery and fertilizers. These would benefit rice farmers and help achieve food security (ensuring people have access to enough food).
- The provision of technical education should not only increase agricultural output but also allow for the diversification of the economy. The manufacturing sector contributes only 2 % of the country’s GDP and could provide an alternative source of employment. The five-year plan also addresses the lack of infrastructure, in particular for electricity generation, which has so far restricted the development of the manufacturing sector.
Text F — Investment in Sierra Leone
- The World Bank ranked Sierra Leone 160th among 190 countries in 2018 for the ease of doing business, citing difficulties in accessing electricity and in obtaining loans and business permits. Government borrowing from the banking sector has increased in recent years, resulting in high interest rates and limited credit availability for the private sector. Foreign investors, however, usually bring capital from abroad.
- Despite the challenges, Sierra Leone offers significant opportunities for investment. Foreign investors are involved in the energy sector, infrastructure, agriculture, tourism, and natural resources. Reduced tax rates on corporate income are offered for investments in agriculture and tourism.
Question
List two dimensions of the Inequality adjusted Human Development Index (IHDI) (Text D, paragraph [3]).
▶️Answer/Explanation
Two of the following dimensions:
- Long and healthy life
- Knowledge
- A decent standard of living