OxfordAQA A-level Economics: Factors that affect economic development (9640) – 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 section 3.4.3.2, Factors that affect economic development, of the OxfordAQA International AS and A-level Economics (9640) specification, version 1.2. This is extra International A2 content (section 3.4, Unit 4). Every country and figure is invented. Revise first with the study guide and revision notes. Also see the OxfordAQA Economics hub, the checklist and the diagnostics.

Questions

1. Country F has a savings rate of 12% of GDP and a capital-output ratio of 4. GDP is 80 billion. (a) Calculate the Harrod-Domar growth rate. [1] (b) Calculate the savings rate needed for 5% growth. [2] (c) Calculate the annual savings gap in billions. [2] (d) Explain one limitation of the model. [2]

2. Country G’s population aged 0 to 14, 15 to 64 and 65 plus is 24m, 64m and 6m. Twenty years later it is 18m, 72m and 10m. (a) Calculate the dependency ratio in each year. [2] (b) Explain how the change could help development, and one condition for it. [2]

3. Country H’s export price index is 95 and its import price index 125 (each index was 100 in the base year). (a) Calculate the terms of trade. [2] (b) State the percentage change from the base year. [1] (c) Calculate the percentage rise in export volume needed to buy the same volume of imports. [1]

4. Demand for a crop has price elasticity of −0.5. A drought cuts supply by 8%. (a) Estimate the percentage change in price. [2] (b) Calculate the percentage change in total revenue for the whole sector. [2] (c) Explain why a farmer who lost the whole crop does not gain. [1]

5. Country J owes external debt of 45 on GDP of 90. Debt service is 6 and export earnings are 24. (a) Calculate debt to GDP. [1] (b) Calculate the debt-service ratio. [1] (c) Exports fall by 25% with debt service unchanged. Calculate the new ratio. [2] (d) State one effect on development. [1]

6. Explain the inequality Kuznets curve. [4]

7. Country K has public debt of 60 and GDP of 150. It runs a deficit of 9. Nominal GDP grows 4%. (a) Calculate debt to GDP at the start and after one year. [3] (b) Explain one argument for and one against the deficit. [3]

8. Explain two ways in which inequality of opportunity could slow development. [6]

9. Country L has exports of 45, imports of 39 and GDP of 140. (a) Calculate the openness ratio. [2] (b) Calculate the trade balance as a percentage of GDP. [1] (c) State one risk of high openness. [1]

10. Evaluate the view that dependence on primary products holds back development. [9]

11. Evaluate whether strong institutions matter more for development than capital accumulation. [12]

Answers

1. (a) 12 / 4 = 3.0% [1] (b) s = g × k [1] = 5 × 4 = 20% [1] (c) Gap = 20 − 12 = 8 percentage points [1]; 0.08 × 80 = 6.4 billion [1] (d) For example, it assumes k stays constant [1], but technology and skills change how much output capital produces [1]. Equally valid: saving may not become productive investment. Examiner insight: Show s = g × k before substituting so your method is visible, and give a limitation a reason, not just the word “unrealistic”.

2. (a) Year 1: (24 + 6) / 64 × 100 = 46.9 [1]. Year 20: (18 + 10) / 72 × 100 = 38.9 [1] (b) Fewer dependants per worker, so more saving and output per head [1], provided jobs are created for the larger working-age group [1]. Examiner insight: Strong answers state the condition (jobs, skills) rather than assuming a falling ratio helps by itself.

3. (a) 95 / 125 × 100 [1] = 76.0 [1] (b) Fall of 24.0% [1] (c) 125 / 95 = 1.316, so 31.6% [1] Examiner insight: Check the direction: export index over import index. Reversing it gives 131.6 and the wrong conclusion.

4. (a) Price change = 8 / 0.5 [1] = 16% rise [1] (b) 0.92 × 1.16 = 1.0672 [1], so revenue up 6.7% [1] (c) Higher price is multiplied by a quantity of zero, so that farmer’s income falls [1]. Examiner insight: State that the figure treats elasticity as constant and is an estimate; it is also worth adding that the sector gains while individual farmers can lose.

5. (a) 45 / 90 × 100 = 50% [1] (b) 6 / 24 × 100 = 25% [1] (c) Exports 24 × 0.75 = 18 [1]; 6 / 18 × 100 = 33.3% [1] (d) More export earnings go on debt, leaving less for imports of capital, health and education [1]. Examiner insight: Part (c) shows why exporters of one commodity are vulnerable; link the number to development, not just to the ratio.

6. Inequality first rises as income per head grows [1], because workers move from low-income farming to better-paid industry and gains are uneven [1]. At higher incomes it falls [1], as education, taxation and welfare spread gains, giving an inverted U shape [1]. Examiner insight: Describe the shape and give the economic reason for both halves; shape alone earns little.

7. (a) 60 / 150 × 100 = 40.0% [1]. New debt 60 + 9 = 69 and GDP 150 × 1.04 = 156 [1]; 69 / 156 × 100 = 44.2% [1] (b) For: borrowing for roads or schools can raise productive capacity [1]. Against: the ratio rises and interest costs crowd out other spending, especially with foreign-currency debt [1]. Using the figures from part (a) to support the argument [1]. Examiner insight: Use your result from part (a); the argument against is stronger when it refers to the rise from 40.0% to 44.2%.

8. Point 1: children of poor households cannot afford school or health care [1], so talent is wasted and human capital stays low, reducing productivity and growth [1]. Point 2: credit-constrained households cannot borrow to start businesses [1], so investment is lower and the market for local firms stays small [1]. Developed point on each, such as lower tax revenue or unrest [1] and a stated condition or limit [1]. Examiner insight: Each point needs a chain from inequality to a development outcome, not just “the poor lose out”.

9. (a) (45 + 39) / 140 × 100 [1] = 60.0% [1] (b) (45 − 39) / 140 × 100 = 4.3% surplus [1] (c) Exposure to a fall in world demand or a price shock [1]. Examiner insight: Label the balance as a surplus or deficit; the sign is part of the answer.

10. Case for: prices are unstable [1] because supply and demand are inelastic [1], so incomes, tax revenue and investment swing [1]. Prebisch-Singer: lower income elasticity means terms of trade fall [1]. Few manufacturing spillovers [1]. Against: resources can fund investment [1] if institutions are strong; critiques show prices do not always fall [1]. Judgement: depends on diversification and governance, with a reason [1]. Linked point, such as dependency interacting with debt [1]. Examiner insight: Aim for a final view that names what it hinges on, such as diversification, instead of a list of pros and cons.

11. Capital: raises productivity [1], saving funds investment [1], Harrod-Domar shows s and k matter [1]. Institutions: secure property rights allow borrowing and investment [1]; corruption raises costs [1]; conflict destroys capital [1]; the rule of law supports contracts and trade [1]. Interaction: capital is wasted where governance is weak [1]. Limits: institutions are slow to change [1]; some countries grew with weak institutions at first [1]. Judgement with conditions [1], and a supported final conclusion [1]. Examiner insight: Pick a side and justify it, while showing the factors interact; an even-handed answer without a judgement tends to stall.

Where marks are usually lost

• Using the Harrod-Domar formula the wrong way up.
• Quoting a ratio without the working or with the wrong base.
• Describing the Kuznets curve without the cause of each half.
• Writing “unrealistic” as a limitation without saying why.
• Treating the terms of trade as a cause of falling GDP without explaining income elasticity.
• Calling debt always harmful, or deficits always helpful.
• Writing about growth when the question asks about development.
• Leaving the evaluation until a one-line final sentence.

Next steps

• Read the revision notes and the study guide.
• Open the OxfordAQA Economics hub and the checklist.
• Try all free 10-minute diagnostics.
• Book a free trial class at /trial/.

Official syllabus

OxfordAQA International AS and A-level Economics (9640), specification version 1.2, section 3.4.3.2, first teaching September 2020 (OxfordAQA).