Scribd
Upload
14 views

Data response Nov 2024 answers

Chile's current account was in deficit in early 2022 despite a trade surplus due to a primary income account deficit from foreign investment repatriation and a deficit in the balance of services. To reduce imports of consumer goods, Chile could implement a tariff, but its effectiveness depends on the price elasticity of demand. A decline in the Gini coefficient from 52.1 to 44.4 indicates improved income equality, while increased government education spending could enhance incomes for poorer households, though its success is contingent on addressing structural barriers.

Uploaded by

sajj6062
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
14 views

Data response Nov 2024 answers

Chile's current account was in deficit in early 2022 despite a trade surplus due to a primary income account deficit from foreign investment repatriation and a deficit in the balance of services. To reduce imports of consumer goods, Chile could implement a tariff, but its effectiveness depends on the price elasticity of demand. A decline in the Gini coefficient from 52.1 to 44.4 indicates improved income equality, while increased government education spending could enhance incomes for poorer households, though its success is contingent on addressing structural barriers.

Uploaded by

sajj6062
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 2

1(a) Identify two possible reasons why the current account on the balance of payments in

Chile is in deficit in the first quarter of 2022 despite the surplus on the balance of trade in
goods. [2]

Although Chile recorded a surplus on the balance of trade in goods in early 2022, its overall
current account was still in deficit. One likely reason is a deficit in the primary income
account, which includes payments to foreign investors and workers. Since Chile has a large
mining sector with significant foreign investment, it is likely that profit repatriation to foreign
companies increased, contributing to the primary income deficit.

A second reason may be a deficit in the balance of services, where payments for services
such as transport, travel, and financial services may have exceeded earnings. These
deficits would oJset the trade surplus and explain the overall current account deficit.

1(b) Consider the likely success of one policy that Chile could use to reduce the imports of
consumer goods. [4]

Chile could introduce a tariJ on imported consumer goods. This would raise their prices,
making them less attractive to domestic consumers. As a result, demand for imports would
likely fall, reducing import expenditure. However, the success of this policy depends on the
price elasticity of demand for these goods. If consumers are not sensitive to price changes
(i.e. demand is inelastic), the tariJ may not significantly reduce import levels, limiting the
policy’s eJectiveness.

1(c) Explain what is meant by the fall in Chile’s Gini coeJicient from 52.1 to 44.4. [2]

The Gini coeJicient is a measure of income inequality. A fall from 52.1 to 44.4 indicates
that income is now more equally distributed among the population, showing a reduction in
income inequality over time.
1(d) Assess the extent to which ‘the government increasing its education spending’ may
improve the incomes of poorer households in Chile. [6]

Government spending on education can improve incomes by increasing access to merit


goods such as schooling and skills training. In Chile, more investment and free college
tuition can help low-income families aJord higher education, potentially improving their
job prospects and future earnings. Increased spending may also lower other barriers to
education, such as material costs or school availability.

However, success may be limited by opportunity costs—poorer families might still need
children to work rather than study. Also, information failures may persist, where families do
not fully recognize the long-term value of education. Additionally, if spending increases are
not sustainable or well-targeted, the benefits may be short-lived or uneven.

In conclusion, while increased education spending has strong potential to improve


incomes for the poor, its success depends on implementation quality and the removal of
other structural barriers to access.

1(e) Assess the likely impact of the rise in the world copper price from 2020 on the future
economic growth of Chile. [6]

A rise in copper prices is likely to benefit Chile, as copper accounts for a large share of
exports and GDP. If world demand for copper remains strong and price elasticity is low,
export revenues could rise significantly, contributing to GDP growth, improved tax
revenues, and increased public spending on infrastructure and social programs.

However, higher prices do not always guarantee higher revenues. In February 2022, copper
revenues fell despite higher prices, possibly due to price elastic demand or reduced global
demand. Long-term overreliance on copper is risky, especially given that copper is a finite
resource, and new competition could reduce future gains.

Overall, the impact of rising copper prices could support short- and medium-term growth,
but for sustainable development, Chile will need to diversify its economy beyond copper.

You might also like

pFad - Phonifier reborn

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.

Note: This service is not intended for secure transactions such as banking, social media, email, or purchasing. Use at your own risk. We assume no liability whatsoever for broken pages.


Alternative Proxies:

Alternative Proxy

pFad Proxy

pFad v3 Proxy

pFad v4 Proxy