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Barriers to Economic Growth and/or Economic Development · Paper 2 — Free Economics SL Practice Questions

1MasteryLAQFactors inhibiting economic development10 marksPaper 2~15 min

The country of Andolia is a low-income nation in sub-Saharan Africa. Its economic development is severely constrained by internal barriers. Andolia has a Gini coefficient of

0.58

, indicating extreme income inequality. The adult literacy rate is only

52\%

and life expectancy at birth is

58

years. The government spends

2\%

of GDP on healthcare and

3\%

on education. Most of the population relies on subsistence agriculture, and there is limited access to formal credit for small-scale farmers. Infrastructure is poor: only

15\%

of roads are paved an unreliable electricity grid causes frequent power outages.

(a)

Using a fully labelled Lorenz curve , explain how income inequality in Andolia may act as an internal barrier to economic development. [4 marks]

(b)

Evaluate the effectiveness of two policies the government of Andolia could implement to address the internal barriers to economic development identified in the text. In your answer, make a justified judgement about which policy is likely to be more effective in the long run. [6 marks]

Solutions

2MasteryLAQFactors inhibiting economic development10 marksPaper 2~15 min

A landlocked nation in Central Asia, Karzakhstan, has experienced modest economic growth of 3 percent per year over the last decade, yet its economic development indicators remain low. The Human Development Index (HDI) stands at

0.52

, placing it in the low human development category. Copper accounts for 70 percent of export earnings; the mining sector is capital-intensive and employs only 2 percent of the labour force. The government has accumulated a large sovereign wealth fund from copper revenues, but public-service spending remains low. A persistent gender gap in education exists: only 40 percent of girls complete secondary school, compared to 65 percent of boys.

(a)

Explain how Karzakhstan's dependence on copper as a single commodity export acts an internal barrier to economic development. Use the concept of the resource curse in your answer. [4 marks]

(b)

Evaluate the extent to which directing copper revenues from the sovereign wealth fund into girls' education could overcome Karzakhstan's internal barriers to economic development. In your answer, consider both the strengths and limitations of this policy, and justify which complementary policy would most enhance its effectiveness. [6 marks]

Solutions

3ChallengeLAQFactors inhibiting economic development11 marksPaper 2~17 min

Country X is a low-income country in sub-Saharan Africa with an HDI of

0.425

(2022). Its economy depends primarily on subsistence agriculture, which accounts for

60\%

of employment and

25\%

of GDP. The country has a Gini coefficient of

0.58

. The government has recently discovered significant deposits of rare earth minerals. A multinational corporation (MNC) has offered to extract these minerals in exchange for a 30-year concession paying a

5\%

royalty on revenue to the government. Local civil society groups oppose the deal, arguing it will deepen existing barriers to economic development.

(a)

Explain how two internal barriers to economic development are currently affecting Country X. [4 marks]

(b)

Using a fully labelled Lorenz curve , explain how the level of income inequality in Country X affects economic development. [3 marks]

(c)

Evaluate the view that the proposed mineral extraction deal with the MNC will reduce the barriers to economic development in Country X. (Hint: consider both supporting arguments and counter-arguments before reaching a justified conclusion.) [4 marks]

Solutions

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