Cambridge IGCSE™

ECONOMICS 0455/22
Paper 2 Structured Questions February/March 2021

2 hours 15 minutes

You must answer on the enclosed answer booklet.

* 4 3 9 7 5 9 7 0 4 3 *

You will need: Answer booklet (enclosed)

INSTRUCTIONS
● Answer four questions in total:
Section A: answer Question 1.
Section B: answer three questions.
● Follow the instructions on the front cover of the answer booklet. If you need additional answer paper,
ask the invigilator for a continuation booklet.
● You may use a calculator.

INFORMATION
● The total mark for this paper is 90.
● The number of marks for each question or part question is shown in brackets [ ].

This document has 8 pages. Any blank pages are indicated.

DC (MB) 199838/2
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Section A

Read the source material carefully before answering Question 1.

Source material: Will Germany continue to be a strong economy?

Population fact file 2017 Germany world

population 81 million 7.5 billion
percentage of population aged over 65 22.0% 8.5%
average age 47.4 years 30.6 years

Germany is a country with a trade surplus and a high GDP per head. It also has a budget surplus
(government tax revenue greater than expenditure), a high HDI and a low inflation rate.

In recent years, German firms have exported a higher value of goods and services. This has contributed
to the growth of world trade, caused partly by a fall in transport costs. A relatively large number of
German firms produce both in Germany and in other countries, helped by better communications.

Germany is a major producer and exporter of luxury cars. Demand for luxury cars was influenced in
2018 by increases in incomes in Germany and abroad, a rise in the price of US luxury cars and, in
some countries, a fall in the price of petrol.

Improvements in the quality of education and information on job vacancies have made it easier
for workers to change jobs in Germany. This greater ability to change jobs has helped to reduce
unemployment and to increase the country’s output.

Fewer workers in the German car industry are now members of a trade union. As shown in Table 1.1,
trade union membership in Germany has declined in recent years.

Table 1.1 selected data on the German labour market 2013–2016

Trade union Unemployment Average annual

Size of labour force
Year membership rate wage
(millions)
(millions) (%) ($)
2013 18.0 42.2 5.4 40 567
2014 17.7 42.5 5.1 41 188
2015 17.6 42.8 4.8 42 084
2016 17.0 43.3 4.3 42 708

A challenge facing Germany is its ageing population. The effect of an older labour force is uncertain. It
may mean firms become reluctant to invest in new technology, but a shortage of young workers may
encourage firms to buy more capital goods.

Germany’s population may fall and there will soon be fewer Germans aged under 30 than over 60
unless immigration continues at a relatively high rate. Immigration might increase both the country’s
labour force and its government’s spending on education.

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Answer all parts of Question 1. Refer to the source material in your answers.

1 (a) Calculate the number of Germans aged over 65 in 2017. [1]

(b) Identify two measures of living standards. [2]

(c) Explain one cause of globalisation. [2]

(d) Explain two advantages of an increase in the occupational mobility of labour. [4]

(e) Analyse why the price of German luxury cars may have increased in 2018. [4]

(f) Analyse whether the strength of German trade unions increased from 2013–2016. [5]

(g) Discuss whether or not an ageing labour force will reduce productivity. [6]

(h) Discuss whether or not immigration will increase a country’s budget surplus. [6]

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Section B

Answer any three questions.

Each question is introduced by stimulus material. In your answer you may refer to this material and/or
to other examples that you have studied.

2 India has experienced a relatively high economic growth rate in recent years. This growth has
been driven by increases in government spending and exports, including exports of textiles. India’s
unemployment rate has, however, increased. The government is concerned that trying to reduce
unemployment may increase India’s inflation rate.

(a) Define economic growth. [2]

(b) Explain the possible opportunity cost to India of exporting more textiles. [4]

(c) Analyse how higher government spending could increase economic growth. [6]

(d) Discuss whether or not a government can reduce unemployment without increasing inflation.
[8]

3 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.

(a) Identify one difference between land and labour. [2]

(b) Explain two reasons why demand for a product may be price-inelastic. [4]

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

(d) Discuss whether or not a government should encourage more people to cycle. [8]

4 It is estimated that half of Egyptian men smoke. This is one of the highest rates in the world.
In recent years the Egyptian government has increased the tax on cigarettes. The government
and central bank have also tried to reduce inflation and improve Egypt’s international trade
performance. The Egyptian government could use subsidies to reduce its deficit on the current
account of its balance of payments.

(a) Identify two qualities of a good tax. [2]

(b) Explain two reasons why governments tax cigarettes. [4]

(c) Analyse how a central bank could reduce inflation. [6]

(d) Discuss whether or not an increase in government subsidies will reduce a deficit on the
current account of the balance of payments. [8]

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5 Sweden has a mixed economic system. In 2018, it was operating at a point inside its production
possibility curve (PPC). In 2018, the country’s schools employed nearly 2500 extra teachers. A few
of these had previously been actors. A higher number had previously been government officials
involved with regulation of Swedish monopolies.

(a) Define a mixed economic system. [2]

(b) Explain the difference between a point inside a PPC and a point outside a PPC. [4]

(c) Analyse why an actor may decide to become a teacher. [6]

(d) Discuss whether all monopolies have low costs of production. [8]

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