IGCSE Economics Paper-2: Specimen Questions with Answers 15 - 16 of 100

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Passage

Indonesia booked a trade surplus of US $ 1.27 billion in June as both exports and imports rose from the slump recorded in May, signaling increasing economic activity as the country and its trading partners have begun to lift coronavirus-induced restrictions.

Exports were up 2.28 percent year-on-year (yoy) in June at $ 12.03 billion, the first growth recorded in four months, thanks to rising shipments of manufactured and agricultural goods, Statistics Indonesia (BPS)

Question 15 (5 of 5 Based on Passage)

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Short Answer▾

What does the growth in the export show?

Explanation

Growth in the exports is an encouraging sign for the economy. Exports benefit the economy in the following ways.

  • Employment. Growth in exports leads to creation of employment. For example, the car exports growth has led to the creation of many jobs in car industries, such as BMW factory in Oxford, and Nissan in Sunderland.
  • Economic growth. One of the components of aggregate demand is exports. Rise in exports will lead to the increase in aggregate demand and will cause a higher economic growth. It can also influence the service industry. For example, in Sunderland the success of car exports will help the local economy from increased spending.
  • Current account deficit. In determining the current account deficits exports play a large role. If exports of a country are less than the imports then there will be a deficit in the balance of current account.

Question 16

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What do you mean by Labor intensive production?

Explanation

Labor intensive production means a production process in which labor cost is the highest component. In Labor intensive production cost of capital has a less contribution in the production process. Labor intensity means the amount of labor used in the process of production. In an economy some industries are labor intensive and some are capital intensive.

These include:

  • Hospital/Nursing: Doctors and nurses are difficult to be replaced with machine.
  • Agriculture: Various types of agriculture products need to be picked by a labor with hand. Not all work can be performed with machine. Example- picking of tea leaves.
  • Retail staff: Service offered by retailers to customers.
  • Teaching: Computers cannot take place of teachers.
  • Niche products: For a firm having specialization in niche market, will have little scope for economies of scale and low fixed costs. In case of niche products, we observe a higher labor-intensive production. When production is done at a large scale, production tends to be more capital intensive.
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