Read the source material carefully before answering Question 1. Source material: Happiness Bhutan fact file 2018 Population 0.8m GDP per head $3250 Government spending $450 m Government tax revenue $380 m World Happiness Index ranking 95th Human Development Index ranking 134th The United Nations has published a World Happiness Index every year since 2012. This index ranks countries according to life expectancy, freedom, social support, trust, generosity and GDP per head. New Zealand was ranked 8th in the World Happiness Index in 2019. The governments of both Bhutan and New Zealand now consider a number of influences on the happiness of their populations. While more than half of Bhutan's labour force is employed in agriculture, most people in New Zealand are employed in the tertiary sector. Working conditions, working hours, the type of work and pay vary between the primary and tertiary sectors. Productivity is higher in all sectors in New Zealand than in Bhutan. This is partly the result of higher investment in capital goods and education in New Zealand. New Zealand also has a higher GDP per head. GDP per head ($) can influence net migration (number of people) as shown for selected countries in 2017 in Fig. 1.1. [Figure 1.1] In its 2019 budget, the New Zealand government said it would measure its progress not by increases in GDP but by increases in the quality of people's lives. To achieve this, it announced increased spending on some areas including mental health, child poverty and pollution. Some economists criticised this approach. They argued that the best way the government could improve living standards is to reduce income tax rates. This reduction could change government spending and the quantity of products that people buy, including cars. Tax revenue had increased in New Zealand in 2019, partly because of a rise in revenue from corporation tax. It was, however, difficult to predict firms' future profits. This was because of uncertainty about what would happen to its GDP and its corporation tax rates. 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 2022). The mark or mark type is shown in brackets.

1. [1] $2.6 bn / $2600 m / $2 600 000 000 / 2.6 × 10º
2. [1] Life expectancy
3. [1] GDP per head
4. [1] Government spending was greater than government revenue
5. [1] there was a budget deficit of $70 m
6. [1] the government may have used expansionary fiscal policy
7. [1] Better working conditions / non-wage factors; [1] e.g. working inside / not having to work in wet weather / less stress / more job satisfaction / fringe benefits.
8. [1] Shorter working hours; [1] permitting more leisure time.
9. [1] Type of work / less physically demanding / not manual work; [1] less risk to health / less tiring / less dangerous / fewer accidents / may lack physical strength.
10. [1] Better paid; [1] enabling more goods and services to be purchased / higher standard of living / as may require more qualifications / skills/training / value added may greater in the tertiary sector / tertiary sector may be expanding / primary sector contracting / may be higher demand for tertiary workers.
11. [1] Higher investment in capital goods will enable workers to work with better equipment.
12. [1] leading to more output per worker / worker hour.
13. [1] New capital goods may incorporate advances in technology / be of higher quality.
14. [1] which results in innovation.
15. [1] Capital goods can work for long hours.
16. [1] Higher investment in education can enable more children to be educated / children to be educated for longer / improve quality of education / increase knowledge.
17. [1] leading to increased workers' skills / qualifications.
18. [1] enabling workers to use more advanced technology.
19. [1] Investment in capital goods and/or education can enable capital goods/ workers to work at a faster rate.
20. [1] making them more efficient.
21. [1] and making fewer mistakes / less wastage.
22. [1] Generally, countries with higher GDP per head have net immigration / net migration / the countries with lower GDP per head tend to have net emigration / a positive/direct relationship.
23. [1] New Zealand has the highest GDP per head and the highest net immigration / net migration / highest positive migration (supporting evidence).
24. [1] Cyprus has the second highest GDP per head and the second highest net immigration / net migration / positive migration (supporting evidence).
25. [1] The four countries with the highest GDP per head, all have net immigration / positive net migration (supporting evidence).
26. [1] The two countries with lowest GDP per head both have net emigration / negative net migration (supporting evidence).
27. [1] An exception is Kenya or Mozambique.
28. [1] Kenya has higher GDP per head but higher net emigration than Mozambique (explanation of exception).
29. [1] Higher GDP per head may encourage people to move to the country to increase their living standards / income.
30. [1] People who migrate into the country may be high skilled.
31. [1] Lower GDP per head may encourage people to emigrate to increase their living standards/income.
32. [1] Other influences on net migration include e.g. immigration controls / size of population / wars / political instability.
33. [1] High labour productivity / high-skilled workers may keep costs down and increase profits, motivating more people to be entrepreneurs.
34. [1] Higher investment / better quality capital goods may increase the number of firms or result in expansion of firms and opportunities for entrepreneurs.
35. [1] Investment in education / better quality education may increase the number of people with skills to become entrepreneurs / increase risk-taking ability.
36. [1] Higher government spending on mental health / child poverty / pollution may increase workers' skills / health / productivity.
37. [1] Higher government subsidies may reduce firms' costs of production.
38. [1] Higher government spending may increase total demand.
39. [1] Higher economic growth may have created more opportunities / greater confidence / higher total demand.
40. [1] Net immigration may have continued, with some immigrants being entrepreneurs / setting up new firms, increasing total demand.
41. [1] A cut in income tax rates could increase demand, firms' revenue / profits, creating a greater profit incentive.
42. [1] Uncertainty / lack of confidence (e.g., recession, negative economic growth, unclear GDP) could lead to declining rewards for enterprise / greater risk in setting up a firm.
43. [1] Corporation tax may have increased, reducing retained profits / amount of profit that can be kept.
44. [1] Government attempts to reduce pollution / poverty / improve mental health may increase firms' costs of production and reduce profits, creating an opportunity cost (e.g., less spending on enterprise-boosting areas like education).
45. [1] A cut in income tax rates will increase disposable income.
46. [1] This increases the ability to buy goods and services / increases purchasing power, allowing people to buy basic necessities, reduce absolute poverty, fulfil more wants, or buy more luxuries.
47. [1] It may increase spending, increasing total demand, which could reduce unemployment / increase employment, leading to increased output / economic growth.
48. [1] It may increase saving, providing a safety net.
49. [1] It may encourage investment, which may lower costs of production and reduce prices.
50. [1] People may be able to buy more merit goods / better quality education/healthcare, increasing health / life expectancy.
51. [1] It may increase the incentive to work, as people earn more in work than on unemployment benefits.
52. [1] It may enable people to work fewer hours, allowing them to enjoy more leisure time.
53. [1] Tax revenue may fall, potentially leading to cuts in government spending on public services like education, healthcare, mental healthcare, child poverty, pollution, or unemployment benefits, disproportionately affecting the poor who rely on these services.
54. [1] Increased consumption, such as more cars, may lead to increased congestion and pollution.
55. [1] Increased consumption may also lead to greater depletion of non-renewable resources.
56. [1] The benefits may mostly accrue to the rich, with the poor or unemployed seeing little to no improvement in living standards.
57. [1] People might spend on demerit goods, with higher spending potentially reducing health / life expectancy.
58. [1] Higher spending / demand may increase prices, causing inflation, which could leave purchasing power unchanged or even reduce it.