IGCSE Economics Paper-2: Specimen Questions with Answers 10 - 11 of 100

Passage

In an economy there are many large firms. But small firms remain small.

Question 10 (5 of 5 Based on Passage)

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Essay▾

Explain two reasons for the change in production from labor-intensive to capital-intensive.

Explanation

The reason for change in production from labor intensive to capital intensive is as follows:

  • A firm wants to benefit itself from the new and changed technology which lowers the cost of production of goods.
  • The labor available in the market does not possess the necessary skill require for the process of production.
  • In the market there is not enough supply of labor.
  • Too much chaos and disruption has been caused by the labor union strike and lockout.
  • Due to the changing price level in the economy the cost of labor in the market has also risen which leads to shift in production technique from labor intensive to capital intensive.

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 11 (1 of 5 Based on Passage)

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Short Answer▾

What is the impact of covid-19 on the economy?

Explanation

  • Historic contraction of per capita income- The pandemic has led to recession in most of the countries in 2020 with the observance of contract in the per capita income.
  • Advanced countries are supposed to shrink by 7 percent. For a weak economy it would be difficult to cope with the effects of the pandemic. This is the weakest observed in the last 60 years.
  • There will be a lot of pressure on the emerging market and developing economies due to economic pressure, pressure on weak health care systems, loss of trade and tourism, dwindling remittances, subdued capital flows, and tight financial conditions amid mounting debt.
  • Industrial sectors are badly hit by the economy and their growth will dwindle.
  • It will cause long-term damage to the output i.e.. GDP and growth in the production.

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