In 2016, the Indonesian government increased its spending on healthcare and education and considered raising the school leaving age. The government also planned to increase taxation. Such a move might conflict with its aim of reducing unemployment at a time when a number of countries were at risk of entering a recession.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2018). The mark or mark type is shown in brackets.

1. [1] Direct
2. [1] indirect
3. [1] progressive
4. [1] regressive
5. [1] proportional
6. [1] VAT/GST
7. [1] excise duty
8. [1] income tax
9. [1] corporation tax
10. [1] inheritance tax
11. [1] lump sum tax
12. [1] specific tax
13. [1] ad valorem tax
14. [1] Rise in tax revenue (direct/indirect)
15. [1] people earning more / people spending more / output higher
16. [1] Fall in expenditure on unemployment benefit
17. [1] enabling government to spend on other areas e.g. healthcare/education
18. [1] May help the government achieve its macroeconomic objectives
19. [1] e.g. raise GDP / achieve full employment
20. Diagram up to 3 marks:
21. axes labelled Capital Goods & Consumer Goods (also accept any other combination as long as it is clear that it is two separate products, and not Price and Quantity)
22. a curve bowed outwards or a downward sloping straight line drawn to the axes
23. point inside the curve identified as point of unemployment e.g. X
24. Written analysis up to 3 marks:
25. high unemployment means that the available resources are not fully (1) and efficiently used (1)
26. the economy will not be able to produce at its maximum level (1) i.e. on the PPC (1) output of the economy is smaller than the maximum (1) lower than potential living standards (1)
27. May be negative or lower economic growth / recession (1)
28. Up to 5 marks for why it should:
29. [1] More time in education may increase workers' skills
30. [1] raise qualifications
31. [1] reduce unemployment
32. [1] raise productivity
33. [1] increase output / increase economic growth
34. [1] raise wages / increase living standards / increase HDI / reduce poverty
35. [1] lower costs of production / improved quality of products
36. [1] increase net exports / raise exports / lower imports
37. [1] improve the current account position
38. [1] May improve life expectancy / health
39. [1] by making people better informed
40. [1] May attract more MNCs to set up in the country
41. [1] reduce their training costs / raise the quality of their output
42. Up to 5 marks for why it should not:
43. [1] May increase government spending
44. [1] it will involve the use of extra resources
45. [1] there will be an opportunity cost involved
46. [1] example
47. [1] In the short run the labour force will be reduced
48. [1] lower potential output
49. [1] A greater quantity of education does not necessarily mean a rise in quality of education
50. [1] Some of those who receive the extra years, of schooling may not take full advantage of these
51. [1] which may disrupt the learning of others
52. [1] The dependency ratio may rise
53. [1] tax rates may have to be increased
54. [1] Families may not be able to afford the extra years schooling