Read the source material carefully before answering Question 1. Source material: Bank mergers Nigeria and US fact file | | Nigeria 2019 | US 2019 | |:------------------------------------|:-------------|:----------| | Change in GDP | 2.3% | 4.9% | | Inflation rate | 11.5% | 1.8% | | US dollar to Nigerian naira exchange rate | 1 dollar = 400 naira | In 2019, there was a merger between three Nigerian commercial banks to form Nigeria's largest commercial bank. In 2019, two US commercial banks merged to form the US's 6th largest commercial bank. In the US, the three largest banks controlled 32% of the market. In the US and Nigeria, large banks have opened more branches, carried out advertising campaigns and improved online banking. Bank mergers can result in some bank employees losing their jobs. Unemployment did rise in Nigeria in 2019. This is likely to have affected the government's budget as both government tax revenue and government spending will have changed. Most commercial bank workers are well-educated. The number of years of education people receive can affect a country's birth rate. [Figure 1.1] shows average years of schooling and the birth rate in selected countries in 2019. [Figure 1.1] Average years of schooling and birth rate in selected countries 2019 Some households in both Nigeria and the US, who spend more than they earn, borrow from commercial banks. Some children in Nigeria, in low-income households, do not have enough to eat due to the high price of food. A government subsidy to farmers could be used to help low-income Nigerian households. The subsidy could also help to reduce the deficit on the current account of its balance of payments. This will depend on Nigeria's inflation rate compared with other countries and incomes at home and abroad. In the US, nearly 35% of children are overweight. One cause of this is the consumption of high-sugar food and drinks. The US government could impose a minimum price on such products, including chocolate. A minimum price could move the market closer to where social benefit equals social cost. However, some consumers think it would be unfair and some firms think it would reduce profits. A minimum price may also impose a cost on the government and its success would be influenced by how high the minimum price is set.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2022). The mark or mark type is shown in brackets.

1. [1] 16 (1).
2. [2] Open more branches (1); carry out an advertising campaign (1); improve online / mobile banking (1).
3. [2] Same stage of production / both in the tertiary (service) sector / same sector (1); same industry / same product / same service (1); can increase market share (1).
4. [4] Logical explanation which might include: High spending on opening new branches / advertising campaigns / developing online banking (1) need to get back costs / make a profit / may experience diseconomies of scale (1); May offer high quality services (1) have high demand / customers willing to pay a high price (1); High degree of monopoly / market power / control 32% of market (1) customers may have brand loyalty / reluctant to switch banks / lack of substitutes / inelastic demand / can charge high prices to earn high profits/raise total revenue / be a price maker (1); High incomes in the US (1) many customers have the ability to pay a high price (1); Employ skilled / well educated workers (1) so may pay high wages / may have high costs of production (1).
5. [4] Coherent analysis which might include: Likely to increase a deficit / reduce a surplus / may result in a budget deficit (1); Tax revenue likely to fall / budget likely to fall (1) due to lower incomes (1) less income tax revenue (1) lower profits (1) less corporation tax revenue (1) lower spending (1) less indirect tax revenue (1) government may cut taxes to reduce unemployment (1); Government spending likely to rise (1) more spending on e.g. benefits / subsidies to the poor / law and order/ healthcare (1) may be more spending on measures to reduce unemployment / expansionary fiscal policy (1) may spend less on other areas e.g. education (1).
6. [5] Coherent analysis which might include: Overview: Generally, an inverse relationship / the more years of schooling, the lower the birth rate / the fewer years of schooling, the higher the birth rate (1); Supporting evidence (Up to 2 marks maximum for two pieces of relevant supporting evidence e.g.: Germany has the highest years of schooling and lowest birth rate (1); Chad has lowest years of schooling and highest birth rate (1); US has more years of schooling than Argentina and so a lower birth rate (1); the three countries with three highest years of schooling have the three lowest birth rates (1)); Exception: Nigeria / Eritrea (1) Nigeria has more years of schooling than Eritrea but a higher birth rate (1); Comments: More years of schooling is likely to cause people to form partnerships / have children later / focus on careers / increase awareness of contraception/family planning / increase health / reduce size of families (1) increase cost of raising children / having more children may reduce the ability of families to keep their children in education for many years / exception may be result of other influences e.g. differences in fertility rates / differences in social attitudes (1).
7. [6] Award up to 4 marks for logical reasons why it might, which may include: It should raise supply / increase output (1) equivalent to lower cost (1) lower price (1) increasing international competitiveness (1); There may be more funds available to invest (1) raise quality (1) increase exports / reduce imports (1).
8. [6] Award up to 4 marks for logical reasons why it might not, which may include: It may increase inefficiency (1) as firms rely on the subsidy (1) may not pass on the benefit of the subsidy to consumers (1); Nigeria may have a high inflation rate (1) which may offset the cost advantage of the subsidy (1); There may an increase in incomes at home (1) which may increase imports / divert exports to the home market (1); There may be a recession abroad / decrease in incomes of trading partners (1) which reduces exports (1); Lower export prices will not raise export revenue if demand is inelastic (1); The exchange rate may rise (1) increasing export prices / lowering import prices (1); Farmers may import e.g. more machinery (1); There may be adverse weather conditions / disease (1) which reduces quality / quality may remain poor (1); There may be import restrictions / increase in import restrictions imposed by other countries (1).