Section A Read the source material carefully before answering Question 1. Source material: changes in the Nigerian economy Nigeria fact file | | 2017 | |:------------------------|:---------| | Government spending | $19.5bn | | Tax revenue | $12.9bn | | Balance of trade in goods | $10.4bn | | Imports of goods | $32.7bn | Nigeria produces a range of products including delivery vehicles, footwear, machines, maize and office equipment. It does, however, depend heavily on oil for its exports. The government tries to encourage an increase in the output and export of other products. To achieve this, it uses a range of policy measures including changes in taxation and government spending e.g. subsidising the training of construction workers. Successful training can increase job opportunities and wages. The government's aims are to improve Nigeria's macroeconomic performance and to raise living standards. Table 1.1 shows data on living standards in Nigeria and Ethiopia in 2017. Table 1.1 Selected data on living standards in Nigeria and Ethiopia in 2017 | Country | GDP per head ($) | Life expectancy at birth (years) | Average years spent at school | % of children aged under 5 who are underweight | |:--------|:-----------------|:---------------------------------|:------------------------------|:-----------------------------------------------| | Nigeria | 5,900 | 59 | 9 | 31.5 | | Ethiopia | 2,200 | 63 | 8 | 23.6 | Investment in Nigeria has been growing slowly. Some firms are discouraged from spending on capital goods by the relatively high interest rate, high corporation tax rate and economic uncertainty. Nigeria's population is increasing rapidly. The birth rate is high and the death rate is falling but it has net emigration. Nigeria's population was 191 million in 2017 and is forecast to grow to 402 million by 2050. An increase in its population size will create both challenges and opportunities. It will affect the level of demand in the economy, may harm the environment and more food will be needed. The Nigerian government increased the tariff on imported rice in 2016, to encourage an increase in its own rice production. Nigeria is Africa's largest producer of rice but also its largest importer. In 2018, Nigeria imported almost 50% of the rice it consumed. Nigerian farmers produce less rice for every unit of land used than Asian farmers and Nigerian farmers have high costs of production. 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 2021). The mark or mark type is shown in brackets.

1. [1] $43.1bn
2. [1] [delivery] vehicles
3. [1] machines
4. [1] [office] equipment
5. [1] budget deficit (1)
6. [1] government spending exceeded tax revenue (1)
7. [1] government spending was $19.5bn and tax revenue was $12.9bn (1)
8. [1] Training may increase skills of workers (1) raise productivity (1) raise wages / incomes (1) increase job opportunities / employment / reduce unemployment (1) increase income tax revenue (1).
9. [1] Higher wages may increase spending / demand (1) increase indirect tax revenue (1).
10. [1] A more productive labour force may reduce costs of production (1) raise profits (1) increase corporation tax revenue (1).
11. [1] Nigeria's higher GDP per head (income) (1) suggests Nigerians may have been able to enjoy more goods and services (1).
12. [1] Nigeria has a lower life expectancy (1) suggesting poorer healthcare (1).
13. [1] Nigeria has a higher average number of years spent at school (1) suggesting the labour force may be more educated (1).
14. [1] Nigeria has a higher percentage of underweight five-year olds (1) suggesting poor nutrition / income inequality (1).
15. [1] Overall comment: Nigeria's income per head and average years spent at school suggests a higher living standard but life expectancy and percentage of five years underweight suggests a lower living standard (1).
16. [1] Reduce the rate of interest (1) making it cheaper to borrow (1) encouraging borrowing as consumer spending is likely to rise (1).
17. [1] Lower corporation tax (1) increasing the funds available to invest (1) increasing the incentive to invest as return from investment would rise (1).
18. [1] Create greater economic certainty / confidence (1) by e.g. keeping inflation low and stable / not changing government spending and taxation frequently (1) making it easier for firms to plan / it can take time to get a return from investment (1).
19. [1] Provide subsidies/grants/loans (1) decreasing cost of investments (1) encouraging MNCs (1).
20. [1] Raise tariffs (1) increasing demand for home produced goods (1).
21. [1] Less government regulation/policies (1) reduces costs for firms (1) more willing to invest (1).
22. [1] Fall in death rate (1) may indicate improved healthcare (1).
23. [1] Total (aggregate) demand will increase (1) may enable existing firms to expand / increase output (1) new firms to set up (1) attract MNCs (1).
24. [1] Labour force may increase (1) causing total (aggregate) supply to increase / raise productive capacity (1) increase output / GDP (1).
25. [1] May move country towards optimum population (1) if there are unused resources (1).
26. [1] Net immigration will increase labour force (1) and reduce dependency ratio (1)
27. [1] More tax revenue (1) can be spent on improving e.g., public services (1).
28. [1] Birth rate is rising (1) will increase dependency (1) resources which may have increased economic growth may have to be devoted to rearing the children (1).
29. [1] Labour force may fall in the short run (1) to look after the children (1).
30. [1] Pressure will be put on the environment (1) there may be more pollution (1) causing overcrowding / poor health (1).
31. [1] If food output cannot be increased (1) may be more malnourishment/famine / poverty (1) more food is required / food may have to be imported (1) food prices may increase (1).
32. [1] Population is rising but age structure may be changing (1) as there is net emigration of young people (1) may result in reduction in labour force (1).
33. [1] [Opportunity] cost for government (1) which has to spend on health/education rather than infrastructure (1).
34. [1] Increase in output to meet demand (1) results in faster usage of resources in country (1) and shortages (1).
35. [1] A higher tariff may raise the price of imported rice (1) may reduce demand for / consumption of imported rice (1) may cause Nigerians to demand more home-produced rice as it is cheaper (1) effect would be greater, the greater the elasticity of demand for the import of rice (1) may enable Nigerian rice farmers to raise their price / make more profit (1).
36. [1] A tariff may raise government tax revenue (1) some of this could be used to subsidise Nigerian rice farmers / modernise farming methods and so raise productivity (1).
37. [1] Nigerian farmers are less productive than Asian competitors (1) have high(er) costs of production (1) Nigerian price may still be higher even with the higher import tariff (1).
38. [1] The supply of Nigerian rice may be price-inelastic (1) so even if Nigerian farmers could sell their rice for more, they may have difficulties adjusting supply (1).
39. [1] More Nigerian rice will not be sold if quality is poor (1) consumers my prefer the varieties of rice produced in other countries (1) other countries retaliate by imposing higher tariffs (1) current account surplus may be reduced (1).
40. [1] Increase in import tariffs may be small (1) making little difference to import prices and consumption (1).
41. [1] Not enough resources/ factors of production e.g., farmers (1) to produce more rice in Nigeria (1).