Population — practice question

Examine the source material carefully before you answer Question 1. Source material: Cyprus Cyprus is a small country that had a comparatively high HDI ranking in 2019. It exports a mixture of goods and services, such as fruit, pharmaceuticals and clothing. Cyprus imports most of the food it eats, although it grows most of its own grapes and potatoes. In 2019, bad weather affected the world grape harvest. Global grape production dropped by 35% and this created a shortage. Around 14% of Cyprus’s labour force works in the primary sector. The average age of Cyprus’s workers is rising, and a growing number now remain in employment beyond retirement age. This is especially true for highly qualified workers, who are often well-paid, healthy and employed in jobs that do not demand physical strength. Longer life expectancy and the growing cost of funding state pensions led some economists to propose increasing the retirement age. A move like this would affect the government’s budget balance. In 2019, the Cypriot government recorded a budget surplus. However, Cyprus had a deficit on the current account of its balance of payments. A country’s current account balance can be affected by its inflation rate. Fig. 1.1 displays selected countries’ inflation rates (%) and current account balances (% of GDP) in 2019. Cyprus had a very low interest rate in 2019. It was anticipated that this would affect the country’s investment. Since 2015, some firms in the country have become more capital-intensive. This shift has influenced Cyprus’s productivity and may have affected the quality of goods produced. In 2019, two possible future problems for Cyprus’s economy were that the quality of some agricultural land might deteriorate and that some of its leading entrepreneurs might leave the country.