Latvia ranks among the most rapidly expanding economies in Europe. Even though GDP per head remains under the European average, it is closing the gap fast. Living standards are rising. Meanwhile, lower borrowing has lessened the risk of high inflation. The labour market is improving too, with unemployment falling. However, there are worries that balance of payments stability may be weaker.
(a)[2]
Identify two separate indicators of living standards.
(b)[4]
Explain how a decrease in borrowing could cut the chance of high inflation.
(c)[6]
Analyse how economic growth can conflict with balance of payments stability.
(d)[8]
Discuss whether a lower GDP would be a disadvantage for an economy.
Worked solution & mark scheme
This 20-mark question has a full step-by-step worked solution and mark scheme. One marking point: “Indicator: Real GDP per head” …