In 2020, Paraguay’s Consumer Prices Index increased by 3% and its foreign exchange rate moved about. Each year Paraguay records net emigration. People leave a country for a range of reasons. These include a low rate of economic growth and a high level of market failure. The Paraguayan government does intervene in the economy in an attempt to reduce market failure.
(a)[2]
Define what is meant by Consumer Prices Index.
(b)[4]
Explain two methods through which a government could intervene to reduce market failure.
(c)[6]
Analyse how a rise in a country’s foreign exchange rate could lower inflation.
(d)[8]
Discuss whether or not a rise in a country’s economic growth rate will cut 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: “A gauge of inflation / cost of living” …