Wage rate growth has increased recently in Kazakhstan, but its economic growth rate has slowed. This is, in part, due to a fall in exports. To try to increase the economic growth rate, the government has increased its spending on investment. In August 2015, it adopted a floating foreign exchange rate system in an attempt to improve the country's macroeconomic performance.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2020). The mark or mark type is shown in brackets.

1. [1] A payment/reward
2. [1] to labour/workers
3. [1] Lower incomes abroad
4. [1] reduce the ability of foreigners to buy the country's exports / lower demand
5. [1] Rise in the foreign exchange rate
6. [1] will make exports more expensive
7. [1] Quality may fall e.g. educational standards may have declined
8. [1] Price may rise due to inflation/higher costs of production/lower productivity/making exports less competitive
9. [1] Domestic demand may rise
10. [1] products may be switched from the export to the home market
11. [1] Lower output
12. [1] reduce the ability of firms to export as many goods and services / result of fewer resources
13. [1] More investment will increase total (aggregate) demand
14. [1] there will be more capital goods
15. [1] these may be more efficient / embody advanced technology
16. [1] productive capacity will increase / productivity rise
17. [1] costs of production may fall
18. [1] prices may fall
19. [1] quality may rise
20. [1] more products may be demanded by domestic consumers
21. [1] foreign buyers / more exports
22. [1] output may increase
23. [1] Higher investment may increase employment
24. [1] raise income
25. [1] Investment in human capital/education/healthcare
26. [1] can raise productivity
27. [1] the government will not have to devote time and attention to maintaining the exchange rate and so may use policy measures to e.g. reduce inflation
28. [1] fewer foreign exchange reserves would have to be kept to maintain the exchange rate
29. [1] These could be used to stimulate economic activity
30. [1] exchange rate may be lower which may increase economic growth, lower unemployment and improve the current account position
31. [1] a lower exchange rate may cause inflation
32. [1] fluctuations in the exchange rate may create uncertainty
33. [1] This may discourage investment and reduce economic growth
34. [1] may discourage MNCs from setting up in the country
35. [1] a higher exchange rate could reduce economic growth, employment and harm the current account position