This data response connects with: Section 4.2 Development Webnote 422

Sample Data Response Test

Source: SPEC/3/ECONO/HP2/ENG/TZ0/XX

5. (a) Define the following terms indicated in bold in the text:

(i) foreign direct investment (paragraph 􀁰)

level

0 Wrong definition

1 Vague definition

The ideas that it is investment coming from overseas.

2 Precise definition

An explanation that it is investment by multinational

corporations in another country.

(ii) investment (paragraph 􀁰).

level

0 Wrong definition

1 Vague definition

The idea that it is spending on machines by firms.

2 Precise definition

An explanation that it is expenditure by firms on capital

equipment and is an injection into the economy (or any

other reasonable second point).

[2 marks]

0

1

2

[2 marks]

0

1

2

- 18 - N06/3/ECONO/HP3/ENG/TZ0/XX/M+

(b) Explain how allowing for differences in purchasing power may give

a more realistic value of the average GDP per head in India.

level

0 Inappropriate answer

1 Identification of appropriate theory

For explaining that allowances for differences in purchasing

power, shows the GDP per head of the population taking into

account the local prices in the country.

2 Correct application of appropriate theory

For explaining that allowances for differences in purchasing

power, shows the GDP per head of the population taking into

account the local prices in the country and for going on to explain

that prices in India are very low and so average GDP figures,

which are usually expressed in US dollars will, in fact, buy a lot

more than in many other countries.

This data response connects with: Section 4.2 Development [4 marks]

0

1-2

3-4

(c) Using an appropriate diagram, explain how the government could

help to protect farmers against fluctuating prices.

level

0 Inappropriate answer

1 Identification of appropriate theory

For drawing a correctly labelled demand and supply diagram,

where a buffer stock scheme has been implemented or for

providing an explanation of how a buffer stock scheme could be

put into place, where the government buys up surpluses in good

years and sells from stocks in bad years, in order to stabilise

prices.

2 Correct application of appropriate theory

For drawing a correctly labelled demand and supply diagram,

where a buffer stock scheme has been implemented and for

providing an explanation of how a buffer stock scheme could be

put into place, where the government buys up surpluses in good

years and sells from stocks in bad years, in order to stabilise

prices.

There may be different diagrams and/or labelling used to show the

above, and any appropriate diagram and/or labelling may be fully

rewarded.

[4 marks]

0

1-2

3-4

- 19 - N06/3/ECONO/HP3/ENG/TZ0/XX/M+

(d) Using information from the text and your knowledge of economics,

evaluate the effectiveness of adopting an outward oriented strategy

to achieve economic development.

Candidates should explain outward oriented strategy and economic

development.

Responses may include:

a fall in the proportion of people living below the poverty line in

India

the increase in GDP per head in India

the increase in growth rates in India

the 36 per cent increase in HDI in India

greater consumer choice

higher growth rates do not necessarily lead to an increase in

economic development

issues relating to FDI and MNCs

the failure of import substitution polices

access to foreign markets

vulnerability resulting from dependence on foreign markets

This data response connects with: Section 4.2 Development any reasonable response.

Candidates who incorrectly label diagrams cannot be rewarded with

full marks.

Examiners should be aware that candidates may take a different

approach, which if appropriate should be rewarded.

If there is no direct reference to the data, then candidates may not be

rewarded beyond Level 2.

Effective evaluation may be to:

consider short run versus long run consequences

examine the impact on different stakeholders

discuss advantages and disadvantages

prioritize the arguments

[8 marks]

Level

0 No valid discussion.

1 Few relevant concepts recognized.

Little discussion or only basic understanding.

2 Relevant concepts recognized and developed in reasonable depth.

Some attempt at application and analysis.

3 Relevant concepts developed in reasonable depth, demonstrating

effective evaluation, supported by appropriate evidence or theory.

0

1-2

3-5

6-8

Market: = resource allocation system outward oriented strategy market based strategy free enterprise strategy free trade approach to development strategy laissez faire (let the market do/ Adam Smith) market function in terms of " signalling and incentive" i.e. resource allocation mechanism Profit motive " incentive function of market". Market mechanism allocates resources effectively : better resource allocation Privatization (firms privately owned)- firms and households benefit from higher wages and higher profits More growth: more resources available for development Government receives more tax revenue FDI encouraged. MNC's are welcome to do business in the domestic nation Market based / outward oriented strategy promotes free trade ie reduction of trade taxes (tariffs) and membership of the WTO (World Trade Organization) that supports free trade This data response connects with: Section 4.2 Development NOTE: for outward oriented / market based strategy any of the following points would State: = resource allocation system Intervention by government is common planned/command economy is the extreme import substitution strategy common aid is key part of development strategy Government dominates economy and restrictions in place on markets or even an outright ban on market activity ( command economy) Nationalization (state owned enterprises) common Low productivity (o/p per worker per hour low) Low growth in economy: consequence of this is low development Poverty common (including absolute poverty) V Answer: try this! A) Market/outward policy is better. Growth brings jobs and this brings development B) Disadvantage is that market does not guarantee development. High levels of poverty in India - gov must redistribute wealth/merit goods to improve development C) Market is best but not perfect. Good government/non corrupt is also crucial