IB DP Economics: Barriers and strategies for growth and development – 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 – the IB holds copyright in its own papers. Use these alongside the official past papers available through your school or the IB store.

This set follows the IB Diploma Programme Economics guide (first assessment 2022, published February 2020), the course examined from the 2022 session onwards. It covers sub-topics 4.9 and 4.10, for SL and HL; neither has HL-only content. All countries, currencies and figures are invented. Per the guide, Paper 1 allows no calculator, while Paper 2 allows a four-function calculator or a GDC. The marks below are a revision aid: the real papers use an analytic markscheme together with markbands.

The study guide and revision notes cover the content. See also the IB DP Economics hub and printable checklist. Take a free diagnostic if you are unsure where to start.

Questions

1. Construct a poverty cycle for a low-income country, showing at least four linked factors, and explain the links. [4]

2. (calculator-free) Dunmere, a fictional country, exports 6.0 billion dunes of goods a year, of which 4.5 billion is coffee.

(a) Calculate the percentage fall in total export earnings if the coffee price falls 20% and volumes stay the same. [3] (b) Explain why dependence on one primary product is a barrier to development. [2]

3. (calculator-free) Sarkova, a fictional country, has export earnings of 1.8 billion sarks. Its debt service is 0.45 billion. Debt relief cuts debt service to 0.27 billion. The freed money is spent on health, whose budget was 0.36 billion.

(a) Calculate the debt service ratio before and after relief. [2] (b) Calculate the percentage increase in the health budget. [2] (c) Explain one limitation of debt relief as a development strategy. [2]

4. Explain how capital flight can act as a barrier to economic growth. [4]

5. (calculator-free) In Brevane, a fictional country, GDP is 40 billion brevs and informal output is 12 billion. The average tax rate is 18%.

(a) Calculate the informal share of GDP and the revenue forgone if informal output could be taxed at the average rate. [2] (b) Explain one other way the informal economy can hinder development. [2]

6. Distinguish between import substitution and export promotion. [4]

7. A seamstress in Tarnow, a fictional country, borrows 500 units at 20% interest for one year to buy a machine. It adds 90 units a month to her income.

(a) Calculate the interest. [1] (b) Calculate her extra income left after paying the interest and repaying the 500, over the year. [2] (c) Explain why microfinance alone may not end poverty in Tarnow. [3]

8. Explain one strength and one limitation of privatisation as a development strategy. [4]

9. Explain how secure land rights and women’s empowerment might each promote development. [4]

10. (Paper 1 part (a) style) Explain two barriers to economic development, one economic and one political or social. [10]

11. (Paper 1 part (b) style) Evaluate the use of government intervention and market-oriented approaches to promote economic growth and development in a low-income country. [15]

Answers

1. Any valid cycle, for example: low income [1] leads to low saving and tax revenue, so little is spent on health and education [1], which leaves low human capital and productivity [1], which brings low income again; each arrow is explained and the loop is closed [1]. [4] Examiner insight: Diagram questions tend to reward arrows that close the loop and a reason for each link, not a list of factors.

2. (a) Coffee share is 4.5/6.0 = 75%. New coffee earnings are 4.5 x 0.8 = 3.6 [1]. New total is 6.0 - 4.5 + 3.6 = 5.1 [1]. Fall is 0.9/6.0 = 15% [1]. (b) Export earnings swing with one price, so foreign exchange, tax revenue and investment are unstable [1]. Primary goods have low value added, so growth is limited [1]. [5] Examiner insight: In a calculation question, showing the new total as well as the percentage lets partial credit follow if the last step slips.

3. (a) Before: 0.45/1.8 = 25% [1]. After: 0.27/1.8 = 15% [1]. (b) Freed money is 0.45 - 0.27 = 0.18 [1]. Rise is 0.18/0.36 = 50% [1]. (c) Relief may be tied to conditions on spending or policy [1], or the money may be lost to corruption instead of reaching health, or the country may borrow again [1]. [6] Examiner insight: “Explain” tends to need a reason as well as a statement, so name the limitation and say why it follows.

4. Capital flight means savings and investment funds leave the country [1]. This cuts the funds available to domestic firms for investment [1]. A smaller capital stock raises productivity and output more slowly [1]. It may also weaken the currency and raise the cost of imported inputs, which discourages further investment [1]. [4] Examiner insight: Credit tends to go to a developed chain from cause to effect, so a single-line assertion usually gains less.

5. (a) Informal share is 12/40 = 30% [1]. Revenue forgone is 12 x 0.18 = 2.16 billion brevs [1]. (b) Informal workers lack legal protection and cannot easily get credit [1], and informal firms stay small to avoid detection, so they miss economies of scale [1]. [4] Examiner insight: State the assumption that the same tax rate would apply, because the forgone figure depends on it.

6. Import substitution aims to replace imports with domestic production [1], usually protecting local firms with tariffs or subsidies [1]. Export promotion aims to raise sales abroad [1], using support such as subsidies or exchange rate policy to earn foreign exchange [1]. [4] Examiner insight: “Distinguish” asks for a difference between the two, so each point should be set against the other.

7. (a) 500 x 0.20 = 100 units [1]. (b) Extra income is 90 x 12 = 1,080 [1]. Left after interest and principal: 1,080 - 100 - 500 = 480 units [1]. (c) She may be one of many selling similar goods, so extra supply lowers prices [1]. Poverty has other causes such as poor health, weak infrastructure or lack of land rights that a loan does not fix [1]. Loans carry interest and risk, and a failed business leaves her in debt [1]. [6] Examiner insight: Show the interest and principal as separate steps, because a final figure alone may not earn marks if the answer is wrong.

8. Strength: private owners face competition and profit incentives, so efficiency and output may rise [1], and the sale raises revenue for the state [1]. Limitation: a private monopoly may raise prices for poor households [1], or firms cut jobs and services that are unprofitable [1]. [4] Examiner insight: Answers tend to gain from linking the effect to development, such as access for the poor, not only to efficiency.

9. Land rights: secure title lets owners use land as collateral and gives them reason to invest [1], raising farm output and incomes [1]. Women’s empowerment: better access to school, jobs and credit uses talent that was wasted [1], and families that invest in girls’ health and education gain over the long run [1]. [4] Examiner insight: With two items to cover, the answer needs a developed point on each; two thin points usually score less than one of each, fully explained.

10. Economic barrier, for example indebtedness: debt service takes a large share of export earnings and tax revenue [1]. With a ratio of 25% or more, less is left for education, health or infrastructure [1]. Human capital and capital stock grow more slowly [1]. Growth and development suffer, and borrowing may rise further [1]. A sentence applying it to a named country or figure [1]. Political or social barrier, for example corruption: public funds are diverted from schools and roads [1]. Investors fear bribes and uncertain contracts, so FDI falls [1]. Trust in the state falls and tax collection weakens [1]. Less revenue means fewer merit goods and slower development [1]. A sentence applying it to a country or example [1]. [10] Examiner insight: For part (a) style questions, each barrier needs a developed explanation and an application, since a list of barriers is shallow.

11. Plan with indicative creditworthy points: Context: define growth and development and the aim of reducing barriers [1]; set out two approaches [1]. Market-oriented: trade liberalisation, privatisation and deregulation can raise efficiency and competition [1], attract FDI and cut costs [1], and need little government spending [1]. Limits: markets under-supply merit goods [1] and ignore equity [1]. Intervention: funding education, health and infrastructure raises human capital and cuts costs [1], redistribution lowers inequality [1], and the state can fix a cycle at one point [1]. Limits: state capacity is limited and corruption can divert funds [1], taxes affect incentives [1]. Evaluation: judge using conditions such as the strength of institutions [1], the barrier being tackled [1] and the time frame, reaching a reasoned conclusion about the mix [1]. [15] Examiner insight: The real paper uses markbands, so a balanced argument with a justified conclusion tends to matter more than counting points.

Where marks are usually lost

• Drawing a poverty cycle with no arrows or no explanation of the links.
• Mixing up the debt service ratio and the total debt.
• Calculating the fall in earnings for one product, but not for total exports.
• Leaving out units or the percentage sign.
• Treating privatisation, FDI or aid as wholly good or wholly bad.
• Explaining a barrier with no application to a country.
• Giving a list of strategies in an evaluation without a judgement.
• Confusing import substitution with export promotion.

Next steps

• Re-read the study guide, then rework the questions you missed.
• Use the revision notes in the final week.
• Check coverage on the IB DP Economics hub and the printable checklist.
• Try the free 10-minute diagnostics.
• Talk your answers through with a teacher: book a free trial class.

Official syllabus

IB Diploma Programme Economics guide, first assessment 2022, published by the International Baccalaureate Organization (February 2020). This page covers sub-topics 4.9 and 4.10.