In 2020, Paraguay’s Consumer Prices Index increased by 3% and its foreign exchange rate moved up and down. Every year Paraguay has net emigration. People depart from a country for several reasons. These include a low rate of economic growth and a high degree of market failure. The Paraguayan government does intervene in the economy in an effort to lessen market failure.
(a)[2]
Define the term Consumer Prices Index.
(b)[4]
Explain two ways a government may intervene to reduce market failure.
(c)[6]
Analyse how a rise in a country’s foreign exchange rate could cut inflation.
(d)[8]
Discuss whether or not a rise in a country’s economic growth rate will lower emigration from the country.
Worked solution & mark scheme
This 20-mark question has a full step-by-step worked solution and mark scheme. One marking point: “An indicator of inflation or the cost of living” …