There was a significant increase in the money supply in Angola in 2019. The National Bank of Angola was concerned that this would keep inflation above 17% and harm Angola's producers. The Angolan government had concentrated on reducing unemployment, which had fallen from 10% in 2010 to 7% in 2019. Each question is introduced by stimulus material. In your answer you may refer to this material and/or to other examples that you have studied.

Mark scheme

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

1. [1] coins
2. [1] bank notes / paper money
3. [1] bank deposits / accounts
4. [1] digital money
5. [1] The central bank acts as a banker for the government; [1] it accepts tax payments / provides facilities for payments / manages national debt / lends to the government.
6. [1] It operates the government's monetary policy; [1] e.g. changing interest rates / to influence inflation.
7. [1] It holds reserves of foreign currency; [1] to influence the foreign exchange rate.
8. [1] It manages the government's debt; [1] issuing government securities / paying interest on government securities.
9. [1] It issues bank notes; [1] influencing the money supply.
10. [1] It may regulate commercial banks / banking system; [1] to ensure they act responsibly.
11. [1] It acts as a lender of last resort; [1] lending to commercial banks / to prevent banks going out of business / a financial collapse.
12. [1] Unemployment, especially at high levels, represents an inefficient use or waste of resources / not working at full capacity.
13. [1] Lower unemployment would increase output / economic growth, raising incomes / GDP per head and increasing living standards / reducing poverty.
14. [1] This enables people to buy more basic necessities / may reduce the crime rate / may increase exports.
15. [1] Lower unemployment will increase total demand / consumer spending.
16. [1] This increases tax revenue.
17. [1] It lowers government spending on unemployment benefits, increasing the government's ability to spend on other areas (e.g., education) / reducing the budget deficit / reducing the opportunity cost of unemployment benefits.
18. [1] Lower unemployment may reduce the chances of workers losing skills / keeps workers up to date with advances in technology.
19. Why it might harm producers:
20. • [1] may increase costs of production – cost-push inflation – reducing profit
21. • [1] may reduce international competitiveness
22. • [1] may cause menu costs
23. • [1] may cause shoe leather costs
24. • [1] may make it difficult to plan ahead.
25. Why it might not harm producers:
26. • [1] may be demand-pull inflation, increasing firms' revenue
27. • [1] may be low and stable
28. • [1] may be lower than other countries' inflation rates, increasing price competitiveness
29. • [1] may enable them to reduce real wages
30. • [1] may increase tax revenue, some of which may be spent on e.g. subsidies
31. • [1] cost of debt may fall / may be cheaper to borrow (in real terms)
32. • [1] some producers may be making products with inelastic demand.