A Level Economics Example Questions - Data Response
How to use this page:
- Print out the Question.
- Compose your answers. This should take no more than 35 minutes.
- Check your answers against the Edexcel answers
Example Data-Response Questions
From transition to market economy
The fall of the Berlin Wall in 1989 inaugurated fundamental economic and political change in Eastern Europe. It unleashed the forces of transition from centrally planned to market-orientated economies. The motives for change were based on the poor performance of centrally planned economies including inefficiencies in production, the absence of work incentives, the lack of consumer choice, lengthy queues and poor-quality goods. These combined to show that living standards had fallen well below those of market economies.
After more than a decade of transition, progress has been slow. However, success can be found among the central European and Baltic states, countries which have embraced market reforms more readily then elsewhere.
However, even Poland, as the most successful transition economy, has experienced serious problems. State rationing gave way to free markets and there was a huge increase in prices, an inflationary situation made worse by the government printing money to subsidise the unprofitable businesses which could not compete with western firms. Savings were wiped out, creating poverty and inequality. Failing businesses caused output to collapse and unemployment to rise. The Polish currency, the zloty, was devalued in order to restore competitiveness of exports, but at the same time, it made imports very expensive.
Fortunately, the economy has recovered, with many new firms setting up and the private sector now being responsible for more than 60% of GDP. The stable macro-economic environment has led to a large increase in foreign direct investment, taking advantage of Poland's technologically skilled workforce. Some $6.7 billion was invested in 1999, comprising 4.3% of GDP.
Although switching state assets to the private sector has occurred fairly quickly in Poland, the development of market-based institutions and basic commercial rights are taking longer to establish. Corruption and the flouting of business laws are still common.
Table 1 Economic indicators for Poland
| Year | 1989 | 1990 | 1991 | 1992 | 1993 | 1994 | 1995 | 1996 | 1997 | 1998 | 1999 |
| % change in real GDP | 0.2 | -11.6 | -7.0 | 2.6 | 3.8 | 5.2 | 7.0 | 6.1 | 6.9 | 4.8 | 4.1 |
| % unemployed | 6.1 | 6.1 | 11.5 | 13.6 | 15.7 | 14.4 | 13.3 | 12.4 | 11.7 | 11.1 | 9.4 |
| % change in consumer prices | 251.0 | 585.0 | 70.0 | 43.0 | 35.0 | 32.0 | 28.0 | 20.0 | 15.0 | 11.0 | 7.2 |
Source: ERBD Report on Transition Economies, 1999.
a. Distinguish between a centrally planned and market economy. (3 marks)
b. Examine the motives of centrally planned economies to move towards market-based economies. (6 marks)
c. With reference to Poland, explain the problems involved in economic transition. (6 marks)
d. Despite the attractions of a market economy, why is it likely that some government intervention will remain even when economic transition is completed? (5 marks)
End of Example - now check your answers against the Edexcel answers
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