1(a) According to the source material, Vietnam’s GDP

in 2017 was $ 662.4 billion, and the population was 96

million, so Vietnam’s GDP per head in 2017 should be
$662.4 billion/96 million=$6900.[1]

1(b) As the material mentioned, the two rewards to

factors of production are profits to enterprise and
wages to labor.[2]

1(c) It depreciated from $1=19500 dong to $1=22780

dong, which means more dong had to be given to buy
one dollar.[2]

1(d) As mentioned in the material, age can affect

worker’s flexibility and mobility. A young labor force
may be more flexible, switching from doing different
tasks. A young labor force may be more mobile,
switching from one job to another or from one place
to another place.[4]

1(e) According to the material, several factors may

affect Vietnam’s future budget deficit. First of all, high
economic growth / Privatising public sector firms will
raise incomes and profits, which will bring more
revenue from direct taxes. [2] Besides, higher incomes
are likely to result in more spending, and that will
increase more revenue from indirect tax as well. [2]
Raising tax rates can also increase the tax revenue for
the government.[1]

1(f) According to table 1, generally the countries with

highest percentage spending on education have the
highest percentage employed in the tertiary sector
and vice versa. [1]For example, Norway has the
highest % spending and the highest % employed in the
tertiary sector. And Bangladesh has the lowest %
spending and the lowest % employed in the tertiary
sector. [2] The main exception I s Vietnam- second
highest % spending but lowest % employed in the
tertiary sector.[1]
The reason could be a time lag in this case [1]
It is the expected relationship as some tertiary jobs
require high skills. [1] Countries that can afford to
devote a high percentage of resources to education
may have achieved a relatively high level of GDP, and
a higher percent spent will create jobs in education. [2]

1(g) There may be some benefits to consumers caused

by an increase in competition. First, prices may be
reduced to attract more consumers, making them
more affordable to consumers. [2]
Choices may be increased in terms of sellers and
possibly in terms of greater range of products.[2]
Quality may rise with pressure being put on producers
to produce good products to attract consumers.[2]
Producers may respond more fully to changes in
consumer demand.[2]

On the other hand, an increase in competition may not

able to benefit consumers. First, firms may be smaller
and less able to take advantage of economies of scale,
so prices may be higher.[3]
Firms may have less profit and so does not have
incentive to improve the quality of the products.[2]
Deregulation may increase the number of MNCs, who
are likely to be less concerned about causing external
costs.

1(h) The increase in borrowing in Vietnam between

2010 to 2017 may cause inflation in Vietnam in 2017.
Frist, higher consumer demand and investment will
increase total aggregate demand, which may cause
demand-pull inflation. [4]
Government spending may rise, further adding to
aggregate demand.[1]
The economy has very low unemployment, making it
difficult for supply to respond to higher demand.

On the other hand, the increase in borrowing may not

cause inflation in Vietnam in 2017. First, higher
investment may reduce costs of production, lowering
cost-push inflation. [2]
Higher consumer spending may enable firms to grow
and take greater advantage of economies of scale.[2]
Increased education may raise labor productivity, and
reduce costs of production, and thus lower cost-push
inflation.[3]
Privatized firms may be more efficient. [1]
More competition may reduce price rises.[1]

2(a) Immigration can bring larger labor force [1],

increase demand [1], higher tax revenue [1], more
skilled workers [1].

2(b) Deflation may cause a fall in output if due to lower

demand firms will cut back production. [2]
Deflation may cause a decline in economic growth due
to lower aggregate demand. [2]
Exports may increase if domestic products become
more price-competitive.[2]

2(c) Children from low-income families are likely to

receive less education[1], lower quality healthcare[1],
fewer employment opportunities[1], may be less
productive[1], may be in low paid jobs[1], likely to gain
fewer qualifications[1].

2(d) A national minimum wage may reduce poverty.

Firstly, it is set above the equilibrium level, increasing
the pay of the low-paid. [2] Secondly, it may reduce
relative poverty by reducing the gap between high and
low-income earners. [2]
A minimum wage may reduce absolute poverty by
enabling low paid workers greater access to basic
necessities.[2]
A national minimum wage may not reduce poverty.
Firstly, it may not have any impact if set below the
equilibrium level. [2] It may increase unemployment as
it may increase firms’ costs of production[2]. It may not
reduce relative poverty if it results in other workers
pressing for, and getting, wage rises to maintain their
wage differentials.[2]
3(a) Capital good is human-made good used in
production to produce goods and services. [2]

3(b) Changes facing small firms may be lack of finance

as banks may be more reluctant to lend to small
firms.[2]
Small firms may not able to take advantage of
economies of scale, and so have higher average costs.
[2]
Small firms may not well-known so that difficult to
attract consumers.[2]
Small firms may face fierce competition from large
firms who are able to lower their prices and spend
more on advertising.[2]
Higher risk of failure due to inexperience of owners,
higher costs, and less funding. [2]
3（c）

[4]

The diagram above shows how a rise in income may

affect the market for gold. An increase in income will
increase people’s ability to buy gold, shifting the
demand curve rightwards, which will rise price and
quantity traded. [2]
3(d) MNCs may increase production and productivity
in their host countries. Firstly, it may create high
demand for raw materials from domestic firms, which
may cause domestic firms produce more and increase
productivity to respond to more demand.[2]
Secondly, MNCs may bring new technology and
working practices into the home countries, which may
increase productivity of the country, and thus
production.[2] Thirdly, it may also increase labor
productivity by motivating labors with higher wages.[2]

MNCs may not able to increase production and

productivity in their host countries. It partly because
that fierce competition may drive some low-
productivity domestic firms out of business, which will
cause a decrease in production. [4]
Also, it may deplete natural resources, reducing output
in the future.[2]
It may generate external costs including pollution
which may reduce the health of workers.[2]
4(a) Macroeconomics: the study of the whole
economy.[2]

4(b) Unemployment may lower aggregate demand,

which will lower firms’ revenue.[2]
Unemployment may cause lower output, which will
lower the ability to take advantage of economies of
scale. [2]
It may lower average cost due to lower wage costs.[2]
There may be less risk of industrial action as workers
are afraid of losing jobs.[2]
It is easier to recruit worker, reducing costs of
recruiting.[2]

4(c) Lower indirect taxes could reduce costs of

production, encourage investment, and use of more
advanced technology, which could lower domestic
prices, making prices more internationally
competitive.[4]
Lower income tax and corporation tax could motivate
workers and firms to raise productivity, lower price of
exports, and raise quality of exports. [4]

4(d) A current account deficit may mean that a country

is consuming more goods and services than what it is
producing.[2]
It may not cause a problem to a economy when it is
small and only for a short time.[2]
Imports of raw materials and capital goods will
increase output in the future.[1]
The booming economy in the country, which may be
as the result of more primary and secondary income
leaving the country than entering it[2], but it can be
self-corrected by investment attracted into the
country.[1]

A deficit may harm the economy if it is arising due to

a lack of international competitiveness.[1] It will not be
self-correcting.[1] If firms’ costs of production are
higher due to lower productivity or the quality of the
products produced are poor[2], this deficit may
persist.[1].
5(a) The objectives of firms are survival[1], social
welfare[1], profit maximization[1], and growth[1].

5(b) A subsidy to firms could increase production [1]

and lower price[1]. It can increase the production and
consumption of merit goods.[1] Merit goods are
products with external benefits, which are
underconsumption and underproduction if it left to
market forces.[2] A subsidy could also be paid to
private sector firms to produce public goods, which
would not be produced if left to market force. [2]

5(c)
Advances in technology raise the quality of products
and productivity of the economy, which increase
productive capacity. [2]

5(d) An increase in government spending may reduce

unemployment. It may raise aggregate demand,
encouraging firms to hire more workers.[2]
It may be spent on education, which may increase
people’s skills.[2]
It may be spent on subsidies to firms, which encourage
firms to increase output and take on more workers.[2]

An increase in government spending may not reduce

unemployment.
It may encourage people to leave their jobs, if
subsidies are spent on unemployment benefits.[2]
Subsidies may encourage firms to use more capital
goods, for example machines, rather than labour.[2]