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Theme 4 Development Economics Questions
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Development economics questions from past papers. Good way of practicing for real exams under times conditions. Good for revision.
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With reference to the information provided, examine two likely benefits for the Rwandaneconomy of the growth in the country’s population.( 8 marks)
The population has increased from 9.5 million to 12 million.
One likely benefit is a more productive capital force. As population increases, greater is the supply
of labour which can be implicated into the workforce. A country will be operating outside its PPF
and utilising its resources effectively. This should increase export and price competitiveness as more
workforce is used.
However, a large amount of people can be a challenged for the firms, may lead to unemployment.
This leads to increase in gang violence and crimes.
Another likely benefit is per capita incomes are rising as population growth increases the side of
domestic markets- increase in capital investment and spendings. Better standards of living. Greater
consumption and thus greater demand for goods. Shift AD outwards.
Greater population may initiate the movement towards urbanisation. This may lead to not enough
spaces for people to relocate to cities, resulting in formation of favelas and spread of disease.
With reference to the information provided, assess the likely impact on the Rwandan economy of
the change in aid received between 2017 and 2018.
Fell from 102 to 90 in between 2017 and 2018.
Less funding for supply side policies – such as infrastructure and education … fall in living standards
and productivity
Less injections in the circular flow of income – people have less incentive to consume – fall in AD.
Less multiplier effect.
Discuss policies, other than import tariffs, that the Rwandan government could use to develop its
manufacturing industries.
Subsidies to manufacturing industries – this should lower the cost of production. They can purchase
new machinery, greater competitiveness and productivity – better international production. As
more money is funded to reduce cost, firms have greater incentives to reinvest the money into
machinery. Subsidies can also come in form of increased infrastructure – better roads and railways –
improve trade through gravity theory. More cost effective for firms to produce their goods – more
cost effective.
However, the time lag associated with the policies – take a while to implement and benefits are felt.
Opportunity cost- could have that money been better spent on education or healthcare.
Supply side policies – finance education and healthcare- not only improve standards of living but
also increased the quality and quanitiy of human capital. It is healthier and more efficient –
productivity increases – supply of labour increased- more people have enough skills to work in
manufacturing.
, HOWEVER – it is costly to educate a population – find teachers. A more able and skilled workforce
might emigrate from the corruption – leave to a different country where they would earn higher
incomes with better standards of living. (brain drain)
explain the likely impact of a Fairtrade scheme on agricultural communities.
A fair trade scheme would give cocoa farmers a guaranteed minimum price [K]. This would give
them a higher income, which is important as the median annual income for cocoa farmers in Ivory
Coast is just $2,600 US, below the living income of $6,133 [Ap].
Secondly, it would ensure they received a 'Fairtrade premium' [K]. Figure 1 shows that 45% of this
was used to invest in farm equipment, training and funding [Ap]. This enables farmers to grow their
businesses and become more productive over time [An]
Examine two ways, apart from Fairtrade schemes, in which cocoa farmers could boost their
incomes despite the falling price of cocoa.
One way is to diversify production [K]. The extract says farmers could 'diversify into other crops,
livestock or non-farm activities' [Ap]. As farmers diversify, they open other income streams and
boost their incomes despite falling cocoa prices [An]. However, they may not be able to diversify if
they are already working at full capacity [E]
Another way is to invest in training and resources [K]. Cocoa farms in the Ivory Coast on average
'produce only around half of the output that could be achieved' [Ap]. By investing in training,
fertilisers and machinery, they could increase yields, which would lead to greater sales and
therefore higher incomes [An]. However, it is possible that higher yields could lead to lower prices,
so the effect on incomes could be less significant than hoped [E]
Discuss the problems for the Ivory Coast of dependency on cocoa for a large proportion of their
exports. Refer to Figure 2 in your answer.
Ivory Coast is heavily dependent on cocoa for their exports. Figure 2 shows that cocoa forms the
majority of Ivory Coast's exports, at 54% [Ap]
One problem with this is that it can create economic instability [K]. If they exported a diverse range
of products, then price changes in one good would not dramatically affect the total value of exports.
Cocoa is a primary product and an agricultural good which is dependent on the quality of the
harvest, so supply is price inelastic [Ap]. Furthermore, demand can vary significantly as it can be
subject to speculation [Ap]. Any shifts in demand will lead to large changes in price, which can
increase the volatility of cocoa prices [An]. By relying so heavily on cocoa, then any changes in the
price of cocoa will have significant effects on the total value of exports [An]. If cocoa prices fall, then
the total value of exports will fall. This will lead to a worsening of the trade balance. This would
reduce Aggregate Demand, leading to a fall in real GDP and possibly increased unemployment as
demand for labour is derived from demand for the output it produces. Such volatility would create
great instability in the economy [An]
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