Read the source material carefully before answering Question 1. Source material: Vietnam's growing population and economy Vietnam fact file GDP 2010 2017 $272.8 billion $662.4 billion Population 88 million 96 million Foreign exchange rate $1 = 19500 dong $1 = 22780 dong Vietnam's population and its output are increasing. Consumers, workers and firms are benefiting from the higher output. Some Vietnamese people are receiving more generous pensions and higher wages while some firms are earning higher profits. Vietnam's population is ageing but the country still has a relatively young labour force. Age can affect workers' flexibility, mobility, level of experience and their knowledge of the latest technology. The Vietnamese government wants to raise the quality of its labour force by spending more on education. Vietnamese children have recently performed better in international tests than children in richer countries. Education spending can influence the percentage of the labour force working in the tertiary sector as shown in Table 1. Table 1 Education spending as a percentage of GDP and the percentage of the labour force employed in the tertiary sector in selected countries in 2017. Country Education spending % of GDP Labour force employed in the tertiary sector (%) Norway 7.4 78.0 Vietnam 6.3 32.3 France 5.5 75.9 Germany 4.9 71.2 Indonesia 3.6 45.2 Iran 3.1 49.1 Bangladesh 2.0 35.6 Vietnam has had a budget deficit since 2008. The country's high economic growth rate and changes in government policies will affect its budget balance in the future. The government is privatising a number of public sector firms. It also plans to spend more on education and defence and is likely to raise some tax rates. Deregulation has increased the number of firms, both foreign and domestically owned, in a number of markets. For instance, in 2007 there was only one Vietnamese airline. It operated only two routes and the fares it charged were not affordable to most Vietnamese. Now the country has seven airlines offering domestic and international flights. Borrowing by both households and firms increased in Vietnam between 2010 and 2017. Households borrowed mainly to purchase more consumer goods while firms borrowed mainly to invest. Answer all parts to Question 1. Refer to the source material in your answers.

Mark scheme

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

1. [1] $6900 (1).
2. [1] Wages (1) profits (1).
3. [1] It fell/depreciated (1) more dong had to be given to buy one dollar (1).
4. [1] May be more flexible (1) switch from doing different tasks (1).
5. [1] May be more mobile (1) able to switch from one job to another or from one place to another place (1).
6. [1] May be more up to date with advances in technology (1) more productive/able to use advanced technology (1).
7. [1] High economic growth will raise incomes/wages rising (1) higher profits (1) more revenue from direct taxes (1) higher incomes is likely to result in more spending (1) more revenue from indirect taxes (1).
8. [1] Tax rates may be increased (1) reducing the gap between tax revenue and government spending (1).
9. [1] Deregulation / privatisation may increase profits (1) resulting in higher revenue from direct taxes /corporation tax (1).
10. [1] Generally the countries with the highest % spending on education have the highest percentage employed in the tertiary sector and vice versa (1) up to two examples e.g. Norway has the highest % spending and the highest % employed in the tertiary sector, Bangladesh has the lowest % spending and the lowest % employed in the tertiary sector (2) the main exception is Vietnam – second highest % spending but lowest % employed in the tertiary sector (1) there may be a time lag in this case (1).
11. [1] It is the expected relationship as some tertiary jobs require high skills (1) countries that can afford to devote a high percentage of resources to education may have achieved a relatively high level of development (1) a higher percent spent will create jobs in education (1).
12. Apply this example to all questions with the command word DISCUSS (1g, 1h, 2d, 3d, 4d and 5d)
13. Each point may be credited only once, on either side of an argument, but separate development as to how/why the outcome may differ is rewarded.
14. Award up to 4 marks for logical reasons why it might, which may include:
15. prices may be reduced to attract more consumers (1) making them more affordable to consumers (1)
16. choice will be increased in terms of sellers (1) and possibly in terms of a greater range of products (1)
17. quality may rise (1) with pressure being put on producers to produce good products to attract consumers (1)
18. producers may respond more fully to changes in consumer demand (1)
19. Award up to 4 marks for logical reasons why it might not, which may include:
20. firms may be smaller (1), less able to take advantage of economies of scale (1), so prices may be higher (1)
21. firms may have less profit (1) and so spend less improving the quality of the product (1)
22. some firms may be MNCs (1), less concerned about causing external costs (1)
23. Apply this example to all questions with the command word DISCUSS (1g, 1h, 2d, 3d, 4d and 5d)
24. Award up to 4 marks for logical reasons why it might, which may include:
25. higher consumer demand (1) and investment (1) will increase total (aggregate) demand (1)
26. higher total demand may cause demand-pull inflation/cause producers to raise prices (1)
27. government spending may rise, further adding to total (aggregate) demand (1)
28. the economy has very low unemployment/full employment (1) making it difficult for supply to respond to higher demand (1)
29. tax rates may rise (1) which may increase costs of production (1) causing cost-push inflation (1)
30. Award up to 4 marks for logical reasons why it might not, which may include:
31. higher investment may reduce costs of production (1) lowering cost-push inflation (1)
32. higher consumer spending may enable firms to grow (1) and take greater advantage of economies of scale (1)
33. increased education (1) may raise labour productivity (1), reduce costs of production (1) and lower cost-push inflation (1)
34. privatised firms may be more efficient (1)
35. more competition may reduce price rises (1)