CAIE IGCSE Economics 3 Microeconomic De…on Makers

Covered syllabus points

3.1. Money and banking 3.2. Households 3.3. Workers 3.4. Firms 3.5. Firms and production 3.6. Firms’ costs, revenue and objectives 3.7. Types of markets

[Maximum number: 20]

Central banks influence their countries' money supply. Central banks also regulate commercial banks. Households benefit from these commercial banks in several ways. In recent years, commercial banks have introduced new technology. Global online banking increased by 14% between 2019 and 2022. These advances in technology were combined with a greater use of division of labour.

(a)

Identify two ways central banks differ from commercial banks.

[ 2 ]

(b)

Explain two characteristics that coins possess which mean they can perform the functions of money.

[ 4 ]

(c)

Analyse the services provided to households by commercial banks.

[ 6 ]

(d)

Discuss whether or not division of labour will benefit workers.

[ 8 ]

[Maximum number: 4]

Read the source material carefully before answering Question 1.

Source material: Population, household spending and poverty in Romania

Between 1990 and 2022, Romania's population fell from 23 million to 19 million. The country's birth rate and death rate both fell over this period. Some workers from other countries, including Sri Lanka and Vietnam, came to live in Romania. However, more Romanian workers left the country to work and live mostly in other European countries.

If the Romanian economy continues to grow at its relatively high rate, fewer of its people may emigrate and more immigrants may be attracted. Recent economic growth has been driven largely by increases in household spending. Romanians have become wealthier, more confident about their future and have experienced low interest rates.

In April 2022, the Romanian Government placed a maximum price on electricity. Romanians spend a relatively high proportion of their income on electricity and on food. Table 1.1 shows selected countries' GDP per head and average spending on food as a percentage of total household spending.

Table 1.1 GDP per head and average spending on food as a percentage of total household spending in 2022

The poor are particularly affected by changes in electricity prices and food prices. Romania has a relatively high level of poverty. To reduce poverty, some economists have suggested that the government should attract more foreign multinational companies (MNCs) to Romania. More MNCs may affect poverty because of the possible effects on unemployment and prices.

Another way to reduce poverty would be to encourage more women to work. The proportion of women in Romania who work or seek work has fallen in recent years. There is a range of influences on whether women enter the labour force. These include social attitudes, female education and whether childcare facilities and part-time work are available.

Explain two reasons why household spending has increased in Romania.

[Maximum number: 8]

Lanzarote, a Spanish island, was once an area with very high rates of poverty. However, the rise of tourism has greatly reduced unemployment. The government is trying to attract more workers to the island by using non-wage factors. Lanzarote's low taxes also attract workers to the island. Mobility of labour in the island's economy has also increased.

(a)

Identify two non-wage factors that may influence a worker's job choice.

[ 2 ]

(b)

Analyse the influences on the mobility of labour.

[ 6 ]

[Maximum number: 2]

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.

Identify two examples of primary sector industries.

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CAIE IGCSE Economics 3 Microeconomic Decision Makers Topic Practice

Covered syllabus points

Question 1

Question (a)

Question (b)

Question (c)

Question (d)

Question 2

Question 3

Question (a)

Question (b)

Question 4