5.4 Differences in economic development between countries

In the first half of 2022, Guyana's GDP grew by 36.4%. Most of this growth was due to higher output in the primary sector. The government used some of the tax revenue generated from this growth to fund long-run development projects such as infrastructure and education. However, in the short run, there was a rise in house prices.

d) Discuss whether or not increased government spending on education will lead to economic development. [8]

Japan has faced significant periods of deflation in recent decades. Despite efforts to stimulate the economy through fiscal policy measures and monetary policy measures, economic growth remains low. Some economists have also argued that the monetary policy used by the central bank is one of the causes of low productivity in Japan.

b) Explain two influences on productivity. [4]

In recent years, the mobility of labour, the number of women in the labour force and GDP have increased in Bangladesh. In 2019, the central bank of Bangladesh approved three new commercial banks. In that year, women on average earned 77% of the pay of men in Bangladesh. The country's economy experienced the world's seventh highest economic growth rate, with an increase in GDP of 7.4%.

d) Discuss whether or not people living in countries with a high GDP enjoy higher living standards than people in countries with a low GDP. [8]

In the US, the supply of meat from emus, a large bird, is price-elastic. Recently, US farmers have switched to keeping other livestock and growing crops that changed their demand for labour. US farmers are influenced by the subsidies the government provides for the production of selected food items. Some people are reluctant to become farm workers as they think living standards are low in rural areas.

d) Discuss whether or not people living in cities have a higher living standard than those living in rural areas. [8]

Palau is a small island country in the Pacific Ocean. It has received considerable financial support from the US. Living standards are thought to be lower in Palau than in the US. Palau imposes some of the highest tariffs in the world. These trade tariffs affect Palau's current account of its balance of payments. In 2019, commercial bank lending to firms and households in Palau increased.

b) Explain two reasons for differences in living standards between countries. [4]

The demand for smartphones has become more price-inelastic as the range of functions available has increased. In low-income countries, smartphones are an important tool for economic development. This is because they provide access to education and banking services which were once not available in rural areas. Smartphones have made it easier for people to borrow and save their money.

a) Define economic development. [2]

b) Explain two reasons why children in rural areas may receive less education than those in cities. [4]

In the Netherlands in 2018, there were 1.3 bicycles per person and the world's largest underground bicycle parking area was built in the capital city. Land is scarce in city centres, where most cycling takes place. Demand for bikes in the Netherlands is price-inelastic. Only a few people in the Netherlands borrow money to buy bikes. The government encourages cycling by spending on both bike parking areas and leisure cycle parks.

c) Analyse why households in one country may borrow more than households in another country. [6]

Changes in tobacco production and consumption can have both microeconomic and macroeconomic effects. Tobacco plants are grown in at least 124 countries with different levels of development. A higher proportion of the poor than of the rich consume tobacco products. The market for cigarettes, produced using tobacco, is changing. Demand for cigarettes and some other demerit goods is declining in a number of countries.

b) Explain two causes of differences in economic development between countries. [4]

Mali is a low income and low productivity country in Africa. Its government is using fiscal policy to reduce poverty. The country's main industries are agriculture and gold mining. In recent years, however, there have been some changes in its resource allocation. The country is developing its iron ore industry. Globally, the iron ore industry is one which has experienced a significant number of mergers in recent years.

c) Analyse why a country may have low productivity. [6]

Average life expectancy is as short for the poorest Americans as it is for the people of Sudan, a low-income African country. Low-income individuals tend to live longest in countries with more educated populations. Economic growth can increase education and reduce poverty. In 2017, the US President announced a cut in the tax on firms' profits. He said the measure would increase employment.

b) Explain two reasons why less-educated people tend to have a shorter life expectancy than people who have received more education. [4]