Edexcel International Advanced Level Economics: Constraints on development (YEC11) – Practice Questions

These are original questions written for Marlbridge, for revision and practice on this content. They are not reproduced past-paper questions, and they do not replicate the exam’s exact structure, question count or mark tariffs – examination boards hold copyright in their own papers. Use these alongside the official past papers from your board or school.

These questions cover part of section 4.3.6, item 2 of the Pearson Edexcel International Advanced Subsidiary/Advanced Level Economics specification (YEC11), Issue 2, June 2018: the demographic, debt, credit, infrastructure and skills statements in 2a, and the non-economic statements in 2b. This is International A2 content, in Unit 4 (full International A Level only). Every country, firm and figure here is invented. Study first with the study guide and revision notes. Also see the Edexcel A Level Economics hub, the printable checklist and the free 10-minute diagnostics.

Questions

1. Country E has 18 million people aged 0 to 14, 42 million aged 15 to 64 and 6 million aged 65 and over. (a) Calculate the total dependency ratio. Show your working. [2] (b) Explain one way in which a large youth population may constrain development. [2]

2. In Country A the birth rate is 26 per thousand, the death rate is 6 per thousand and net migration is plus 1 per thousand. Real GDP grows by 5.5%. (a) Calculate the population growth rate as a percentage. [2] (b) Calculate the growth rate of real GDP per head to two decimal places. [2]

3. Country G owes 14.4bn dollars. Its GNI is 48bn dollars, export earnings are 12bn dollars and annual debt service is 2.4bn dollars. (a) Calculate the ratio of debt to GNI. [2] (b) Calculate the debt service ratio. [2] (c) The debt is in dollars. The local currency falls from 8 to 10 units per dollar. Calculate the percentage rise in the debt measured in local currency. [2]

4. The average household in Country H has income of 30,000 and debt of 42,000. (a) Calculate the ratio of debt to income as a percentage. [1] (b) The interest rate on this debt rises from 6% to 9%. Calculate the extra interest as a percentage of income. [2] (c) Explain one effect of this rise on economic growth. [2]

5. A farmer needs a machine costing 900. It will raise revenue by 270 a year. A bank offers a loan at 20% a year. A moneylender charges 8% a month. (a) Calculate the effective annual rate charged by the moneylender, to one decimal place. [2] (b) Calculate the farmer’s net annual gain from the machine using the bank loan. [2] (c) Explain why limited access to banking can constrain development. [2]

6. Country J has 15,000 skilled engineers. In one year 1,200 emigrate. Training each cost the state 40,000. Remittances are 0.9bn on GDP of 25bn. (a) Calculate the percentage of engineers who emigrate. [1] (b) Calculate the training investment lost, in millions. [1] (c) Calculate remittances as a percentage of GDP. [1] (d) Explain why the net effect of this migration on development is uncertain. [3]

7. Explain how poor infrastructure can constrain economic development. [4]

8. Training costs 2,000 and raises a worker’s annual earnings by 320. (a) Calculate the annual rate of return and the payback period. [2] (b) Explain why a low-income household might not buy this training. [2]

9. A government plans a road programme with a budget of 150m at 3m per kilometre. Corruption causes 24% of the budget to be lost. (a) Calculate the length of road built and the shortfall against plan. [3] (b) Explain two ways in which poor governance may reduce investment. [4]

10. Country K’s real GDP index is 100 before a civil war. It falls by 12%, 18% and 10% in three successive years. (a) Calculate the index at the end of the war. [2] (b) Calculate the percentage rise needed to return to 100. [2] (c) Explain two reasons why recovery after a civil war may be slow. [4]

11. Terrorist attacks cut tourist arrivals in Country L from 500,000 to 350,000. Each visitor spends 1,000. The marginal propensity to withdraw is 0.6 and GDP is 20,000m. (a) Calculate the direct loss of tourist spending, in millions. [2] (b) Calculate the total fall in income. [2] (c) Express the total fall as a percentage of GDP. [1]

12. Assess whether non-economic factors are more significant than economic factors in constraining development. [10]

Answers

1. (a) Dependants = 18 + 6 = 24 million [1]. Ratio = 24 / 42 x 100 = 57.1% [1] (b) Many children raise spending on schools and health [1], while low saving and a rising number of job seekers leave fewer resources and jobs per head [1]. [2] Examiner insight: Show the dependants added before dividing, and say which age band you divide by, because a bare answer cannot show the method.

2. (a) Natural increase = 26 minus 6 = 20 per thousand = 2.0% [1]. Add 0.1% migration: 2.1% [1] (b) (1.055 / 1.021) minus 1 [1] = 3.33% [1] Examiner insight: The subtraction 5.5 minus 2.1 gives 3.4, which is only an approximation. The ratio method is the safer route when the question asks for two decimal places.

3. (a) 14.4 / 48 x 100 [1] = 30% [1] (b) 2.4 / 12 x 100 [1] = 20% [1] (c) Debt rises from 14.4 x 8 = 115.2 to 14.4 x 10 = 144 [1]. Rise = 28.8 / 115.2 = 25% [1] Examiner insight: Debt to GNI and debt service ratio use different denominators. Writing the denominator in your working shows which measure you used.

4. (a) 42,000 / 30,000 x 100 = 140% [1] (b) Interest rises from 2,520 to 3,780, an extra 1,260 [1]. As a share of income: 1,260 / 30,000 = 4.2% [1] (c) Households have less to spend on goods [1], so firms’ sales and investment fall and growth slows [1]. [2] Examiner insight: A development of the effect (spending falls, then sales, then growth) gains credit that a bare assertion of lower growth does not.

5. (a) 1.08 to the power 12 is 2.518 [1], so the effective rate is 151.8% [1] (b) Interest = 900 x 0.20 = 180 [1]. Net gain = 270 minus 180 = 90 [1] (c) Without affordable loans, profitable projects such as this one cannot be funded [1]. Firms stay small, productivity and incomes stay low, and saving is low too [1]. [2] Examiner insight: Compound the monthly rate. Multiplying 8% by 12 gives 96%, which understates the cost.

6. (a) 1,200 / 15,000 = 8% [1] (b) 1,200 x 40,000 = 48m [1] (c) 0.9 / 25 x 100 = 3.6% [1] (d) Loss: the training investment and the skills are gone [1]. Gain: remittances raise incomes and returning migrants bring skills [1]. Which effect wins turns on how big the lost training investment is next to remittances, and on what remittances are spent on [1]. [3] Examiner insight: A reasoned conclusion on what the net effect depends on is more useful than a list of benefits and costs.

7. Poor roads, ports or power raise firms’ costs [1]. Higher costs reduce competitiveness in export markets [1]. Unreliable power idles capital and cuts output [1]. Foreign investors prefer locations with better networks, so FDI and technology transfer are lower, slowing growth [1]. [4] Examiner insight: Each point should end in a consequence for output or living standards. Listing types of infrastructure without a link stays at description.

8. (a) Return = 320 / 2,000 x 100 = 16% [1]. Payback = 2,000 / 320 = 6.25 years [1] (b) The household cannot afford the upfront cost [1], and weak credit markets stop it borrowing against future earnings [1]. [2] Examiner insight: State the units (a percentage and years) because an unlabelled number does not show which measure you calculated.

9. (a) Budget delivered = 150 x 0.76 = 114m [1]. Road built = 114 / 3 = 38 km against 50 km planned [1]. Shortfall = 12 km [1] (b) Insecure property rights or weak courts mean investors cannot enforce contracts [1], which lowers the expected return [1]. Unstable or arbitrary policy raises risk [1], so investors demand higher returns or go elsewhere and investment falls [1]. [4] Examiner insight: Name the mechanism (return or risk) that links governance to investment.

10. (a) 100 x 0.88 x 0.82 x 0.90 [1] = 64.9 [1] (b) 100 / 64.944 minus 1 [1] = 54.0% [1] (c) Capital such as roads and factories must be rebuilt [1], which takes years and needs investment that is hard to attract after a war [1]. Skilled workers have died or emigrated [1], and public finances and institutions are weak [1]. [4] Examiner insight: Divide the required gain by the lower figure, not the original one; that is why a percentage fall and the percentage rise needed to recover are not equal.

11. (a) Loss of 150,000 visitors x 1,000 [1] = 150m [1] (b) Multiplier = 1 / 0.6 = 1.67 [1]. Total fall = 150 x 1.67 = 250m [1] (c) 250 / 20,000 x 100 = 1.25% [1] Examiner insight: Show the multiplier as a separate step. An unexplained final figure gives no route to credit if the arithmetic slips.

12. Economic constraints include debt, credit, infrastructure and skills [1]. Non-economic ones include corruption, poor governance, civil war and terrorism [1]. Non-economic factors can be more damaging when severe: a civil war destroys capital and people, as in question 10 where output stays far below its pre-war level [1]. Corruption acts as a tax and diverts public funds, as in question 9, so fewer roads are built [1]. They also undermine the conditions in which economic factors can be tackled, because investors, lenders and donors avoid unstable or corrupt states [1]. Economic constraints can be more persistent: poor infrastructure and low skills hold back productivity for decades even in peaceful, well-governed countries [1]. Debt service can absorb 20% of export earnings, as in question 3, whatever the quality of governance [1]. The constraints interact, so ranking them is hard: poverty makes governance weaker and weak governance deters the investment that would reduce poverty [1]. Context decides: conflict-affected countries are constrained first by non-economic factors, while stable low-income countries are constrained mainly by economic ones [1]. A judgement that picks a view for a type of country and explains why is needed to complete the argument [1]. [10] Examiner insight: Reach a supported judgement about which matters more and under what conditions. A list of both groups of factors with no weighing is a description, not an assessment.

Where marks are usually lost

• Using a bare number with no working or no unit.
• Using 5.5 minus 2.1 for GDP per head when two decimal places are requested.
• Multiplying a monthly interest rate by 12 instead of compounding.
• Dividing a fall by the new figure instead of the starting figure, or the reverse for recovery.
• Mixing debt to GNI with debt service ratio.
• Naming a constraint without a chain to lower output, investment or living standards.
• Giving only the costs of migration and ignoring remittances and skills.
• Writing an assessment that lists factors but never judges which matters more.

Next steps

• Re-read the study guide and the revision notes.
• Check progress on the printable checklist and the course hub.
• Take all free 10-minute diagnostics at /diagnostics/.
• Book a free trial class at /trial/.

Official syllabus

Pearson Edexcel International Advanced Subsidiary/Advanced Level in Economics (YEC11) specification, Issue 2, June 2018, Pearson Education Limited, section 4.3.6, items 2a and 2b.