HL 2 BW 039

HL 2 BW 039

Assessment advice: The questions asked o you paper 2 will inevitably cross over several syllabus sections; this emphasizes the interconnectedness of economics topics

1.       (A) Define the term infrastructure.

Large scale capital which is necessary for economic activity to take place, usually provided by government

(B) Outline the differences between customs union and a common market

Custom unions-

When countries agree to trade freely within the CU, and also agree to adopt common external barriers against any country attempting to import into the Customs Union.

All common markets and economic and monetary unions are also customs unions, thus the EU is customs union [plus a common market].

Common market-

Common markets are customs unions with common policies on product regulation & free movement of goods, services, capital and labor.

The best known example of a common market is the EU.

·         Economic and monetary union

An economic and monetary union is a common market with a common currency.

The best example of an economic and monetary union is the Eurozone, which includes EU member countries that have adopted the Euro as their currency.

2.       Explain using appropriate diagram(s) the possible short term and long term impact of increased and improved infrastructure in any of the EAC economies.

Short term- rightward shift in agg. Demand

Longterm- long run aggregate supply shift to the right because of increased government spending

3.       Using an appropriate diagram, explain the expected effect on an economy of a decrease in the level of corruption

More recorded government activity

More efficiency

More development