Practise poverty-cycle diagrams and country-based explanations of economic, political and social barriers to growth and development in IB Economics SL questions.
Study the extract below and answer the questions that follow.
Micro-credit conflict of interest
(1) The idea of giving small loans to poor people, especially women, was hailed as the key to achieving economic development for even the poorest citizens. Muhammad Yunus, the economist who pioneered the practice by lending small amounts to basket weavers in Bangladesh, won a Nobel Peace Prize in 2006.
(2) The practice has grown so popular, helping establish small businesses such as tailors and hairdressers, that some are now concerned over the direction it has taken. Attracted by the prospect of profits from even the smallest of loans, some banks now dominate micro-credit, with some charging interest rates of over 100 %.
(3) The key question facing the industry remains how much money investors should make from lending to poor people, mostly women, often at hidden interest rates. "Micro-credit should be seen as an opportunity to help people out of poverty, not as an opportunity to make money out of poor people," Yunus said. "Interest rates should be 10 to 15 % above the cost of raising the money and anything beyond that is exploitation. Most micro-credit lenders would fail this test."
(4) How much interest and profit are acceptable and what constitutes exploitation? The interest rates that draw the most concern include those in Nigeria and Mexico, where the demand for small loans from a large population cannot be met by existing lenders. One Mexican lender charges an annual rate of 125 %. The average in Mexico is about 70 %, compared with a global average of about 37 % in interest and fees.
5 There is debate over whether micro-credit loans actually lift people out of poverty. Some researchers conclude that not every poor person is an entrepreneur in waiting but the loans do help relieve some of the worst aspects of poverty.
(6) The micro-credit industry has outgrown its charitable beginning. Despite a promise to put the money back into development, analysts say the high interest rates and healthy profits of the largest micro-credit institutions pushed up interest rates across Mexico.
Using a poverty cycle diagram, explain how micro-credit can "help relieve some of the worst aspects of poverty" (paragraph (5)).
5).
level
0 Inappropriate answer ..... 0
1 Identification of appropriate theory ..... 1-2
For drawing a correctly labelled poverty cycle diagram including investment or for explaining that micro-credit loans fill the savings/investment gap and allow the poverty cycle to be broken, increasing incomes and therefore reducing the worst aspects of poverty.
2 Correct application of appropriate theory ..... 3-4
For drawing a correctly labelled poverty cycle diagram including investment and for explaining that micro-credit loans fill the savings/investment gap and allow the poverty cycle to be broken, increasing incomes and therefore reducing the worst aspects of poverty.
There may be different poverty cycle diagrams used to show the above, and any appropriate diagram, which must include investment, may be fully rewarded, if explained correctly.
Candidates who incorrectly label diagrams can receive a maximum of [3 marks].
Study the extract and data below and answer the questions that follow.
Extract 1
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Extract 2
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Using information from Extract 2, explain how the servicing of debt has an opportunity cost that may affect development in Ivory Coast.
Level
0 The work does not reach a standard described by the descriptors below.
1 The written response is limited.
For a definition of opportunity cost (explicit or implied) and an explanation that money spent on debt servicing means that there is less spending on development objectives, such as health care or education or for identifying information from the extract, such as one-third of government revenue was spent on debt servicing in the 80 's and 90 's, or since 2008 , debt servicing accounts for 15 % of government revenue.
2 The written response is accurate.
For a definition of opportunity cost (explicit or implied) and an explanation that money spent on debt servicing means that there is less spending on development objectives, such as health care or education and for identifying information from the extract, such as one-third of government revenue was spent on debt servicing in the 80 's and 90 's, or since 2008, debt servicing accounts for 15 % of government revenue.
Explain how political and social factors can act as barriers to economic growth and economic development.
Answers may include:
- Terminology: political and social barriers, economic growth, economic development
- Explanation: of any possible political/social barriers, which may inhibit growth and development, such as gender inequality, lack of governance, corruption, unequal political power and status, weak institutional framework involving the legal system, ineffective taxation structures, the banking system and property rights
- Diagram: use of an AD/AS diagram to illustrate economic growth, or a PPC or poverty cycle diagram.
A maximum of [6] should be awarded if only economic growth or economic development in the question item is addressed.
| Marks | Level descriptor |
|---|---|
| 0 | - The work does not reach a standard described by the descriptors below. |
| 1-2 | - The response indicates little understanding of the specific demands of the question. - Economic theory is stated but it is not relevant. - Economic terms are stated but they are not relevant. |
| 3-4 | - The response indicates some understanding of the specific demands of the question. - Relevant economic theory is described. - Some relevant economic terms are included. |
| 5-6 | - The response indicates understanding of the specific demands of the question, but these demands are only partially addressed. - Relevant economic theory is partly explained. - Some relevant economic terms are used appropriately. - Where appropriate, relevant diagram(s) are included. |
| 7-8 | - The specific demands of the question are understood and addressed. - Relevant economic theory is explained. - Relevant economic terms are used mostly appropriately. - Where appropriate, relevant diagram(s) are included and explained. |
| 9-10 | - The specific demands of the question are understood and addressed. - Relevant economic theory is fully explained. - Relevant economic terms are used appropriately throughout the response. - Where appropriate, relevant diagram(s) are included and fully explained. |
Using real-world examples, discuss the significance of economic barriers for a country's economic growth and economic development.
Answers may include:
- Terminology: economic barriers, economic growth, economic development
- Explanation: of how economic barriers such as increasing economic inequality, lack of access to infrastructure and appropriate technology, low levels of human capital, overdependence on primary sector, lack of access to international markets, informal economy, capital flight, indebtedness, geography, eg being landlocked and climate/disease may constrain growth and development
- Diagram: use of any relevant diagram such as PPC, poverty cycle, AD/AS
- Synthesis (discuss): the degree to which the various economic barriers act as a barrier to growth and development;
the relative importance of economic barriers as compared to political/social barriers;
overall assessment
- Examples: real-world examples of countries that have experienced economic barriers to growth and development.
Examiners should be flexible in the interpretation of the difference between economic and political/social barriers.
Examiners should be aware that candidates may take a different approach which, if appropriate, should be rewarded.
N.B. It should be noted that definitions, theory, and examples that have already been given in part (a), and then referred to in part (b), should be rewarded.
A maximum of [9] should be awarded if only economic growth or economic development in the question item is addressed.
| Marks | Level descriptor |
|---|---|
| 0 | - The work does not reach a standard described by the descriptors below. |
| 1-3 | - The response indicates little understanding of the specific demands of the question. - Economic theory is stated but it is not relevant - Economic terms are stated but they are not relevant. - The response contains no evidence of synthesis or evaluation. - A real-world example(s) is identified but it is irrelevant. |
| 4-6 | - The response indicates some understanding of the specific demands of the question. - Relevant economic theory is described. - Some relevant economic terms are included. - The response contains evidence of superficial synthesis or evaluation. - A relevant real-world example(s) is identified. |
| 7-9 | - The response indicates understanding of the specific demands of the question, but these demands are only partially addressed. - Relevant economic theory is partly explained. - Some relevant economic terms are used appropriately. - Where appropriate, relevant diagram(s) are included. - The response contains evidence of appropriate synthesis or evaluation but lacks balance. - A relevant real-world example(s) is identified and partly developed in the context of the question. |
| 10-12 | - The specific demands of the question are understood and addressed. - Relevant economic theory is explained. - Relevant economic terms are used mostly appropriately. - Where appropriate, relevant diagram(s) are included and explained. - The response contains evidence of appropriate synthesis or evaluation that is mostly balanced. - A relevant real-world example(s) is identified and developed in the context of the question. |
| 13-15 | - The specific demands of the question are understood and addressed. - Relevant economic theory is fully explained - Relevant economic terms are used appropriately throughout the response. - Where appropriate, relevant diagram(s) are included and fully explained. - The response contains evidence of effective and balanced synthesis or evaluation. - A relevant real-world example(s) is identified and fully developed to support the argument. |