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A Level H2 Economics Data Response Quiz

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Questions

A-Level Economics H2 Quiz - Data Response

Name: _________________________ Class: _________________________ Date: _________________________ Score: ______ / 50

Duration: 1 hour 15 minutes Total Marks: 50

Instructions:

This quiz contains 20 questions based on data response skills tested in A-Level Economics H2.
Read all extracts, tables, and figures carefully before answering.
Marks are indicated in brackets. Allocate your time accordingly.
Where diagrams are required, label all axes, curves, and equilibrium points clearly.
Show all working for calculation questions.

Extract 1: Global Coffee Market (for Questions 1–5)

The global coffee market has experienced significant price volatility over the past decade. Table 1 shows the average annual price of Arabica coffee beans from 2018 to 2023.

Table 1: Average Annual Arabica Coffee Price (USD per pound)

Year	Price (USD/lb)
2018	1.10
2019	1.05
2020	1.15
2021	1.55
2022	2.10
2023	1.80

Extract A: "Brazil, the world's largest coffee producer, experienced a severe drought in 2021, followed by unexpected frosts that damaged coffee crops. Meanwhile, global demand for coffee continued to rise, particularly in emerging markets such as China and India, where coffee consumption has grown at an annual rate of 8% since 2019."

Section A: Trend Analysis and Interpretation (Questions 1–5)

1. With reference to Table 1, describe the trend in Arabica coffee prices between 2018 and 2023. [2 marks]

2. With reference to Extract A, identify and explain two factors that contributed to the change in coffee prices between 2021 and 2022. [4 marks]

3. Using a demand and supply diagram, explain how the events described in Extract A affected the equilibrium price and quantity in the global coffee market in 2021–2022. [6 marks]

Draw your diagram in the space below. Label all axes, curves, and equilibrium points.

4. Between 2022 and 2023, coffee prices fell from USD 2.10/lb to USD 1.80/lb. Suggest one possible reason for this decline, with reference to economic concepts. [2 marks]

5. "The price of coffee is determined entirely by supply-side factors." With reference to the data in Table 1 and Extract A, evaluate this statement. [4 marks]

Extract 2: Singapore's Labour Market (for Questions 6–10)

Table 2: Singapore's Unemployment Rate and GDP Growth (2019–2023)

Year	Unemployment Rate (%)	GDP Growth (%)
2019	2.3	1.3
2020	3.0	-4.1
2021	2.7	8.9
2022	2.1	3.6
2023	1.9	1.1

Extract B: "The Singapore government implemented significant fiscal stimulus measures in 2020 and 2021, including the Jobs Support Scheme which subsidised up to 75% of wages for affected sectors. The Monetary Authority of Singapore (MAS) also maintained an accommodative exchange rate policy to support economic recovery."

Section B: Macroeconomic Data Response (Questions 6–10)

6. With reference to Table 2, compare the relationship between Singapore's unemployment rate and GDP growth rate between 2019 and 2023. [3 marks]

7. Explain how the fiscal stimulus measures described in Extract B would have affected Singapore's unemployment rate in 2021. [4 marks]

8. Using an AD-AS diagram, explain the combined effect of fiscal stimulus and accommodative monetary policy on Singapore's real GDP and general price level during the recovery period of 2021–2022. [6 marks]

Draw your diagram in the space below. Label all axes, curves, and equilibrium points.

9. With reference to Table 2, calculate the percentage point change in Singapore's unemployment rate from its peak during this period to 2023. [2 marks]

10. "Fiscal policy alone was responsible for Singapore's economic recovery in 2021." With reference to Extract B and Table 2, evaluate this statement. [4 marks]

Extract 3: Electric Vehicle Market (for Questions 11–15)

Table 3: Global Electric Vehicle (EV) Sales and Government Subsidies (2019–2023)

Year	Global EV Sales (millions)	Average Government Subsidy per EV (USD)
2019	2.1	5,000
2020	3.0	5,500
2021	6.5	6,000
2022	10.2	5,200
2023	13.5	4,000

Extract C: "Governments worldwide have been scaling back EV subsidies as the market matures. However, technological improvements have reduced battery costs by 60% since 2019, making EVs increasingly price-competitive with internal combustion engine vehicles. Some analysts argue that the EV market has reached a tipping point where consumer demand is becoming self-sustaining."

Section C: Policy and Market Dynamics (Questions 11–15)

11. With reference to Table 3, describe the trend in global EV sales between 2019 and 2023. [2 marks]

12. With reference to Table 3, compare the trend in EV sales with the trend in average government subsidies per EV from 2019 to 2023. [3 marks]

13. Using a demand and supply diagram, explain how the reduction in battery costs (Extract C) would affect the market for electric vehicles. [5 marks]

Draw your diagram in the space below. Label all axes, curves, and equilibrium points.

14. With reference to Extract C, explain one reason why governments might choose to phase out EV subsidies. [2 marks]

15. "The growth in EV sales is primarily driven by government subsidies rather than market forces." With reference to Table 3 and Extract C, evaluate this statement. [4 marks]

Extract 4: International Trade and Protectionism (for Questions 16–20)

Table 4: Country X's Current Account Balance and Exchange Rate (2019–2023)

Year	Current Account Balance (USD billions)	Exchange Rate (per USD)
2019	+45	1.35
2020	+52	1.32
2021	+38	1.38
2022	+20	1.42
2023	+8	1.45

Extract D: "Country X, a major exporter of manufactured goods, has faced increasing trade restrictions from its trading partners. In 2022, several countries imposed tariffs on Country X's exports, citing concerns about unfair trade practices. Additionally, Country X's currency has been depreciating against the US dollar, which has mixed effects on its trade balance."

Section D: International Economics Data Response (Questions 16–20)

16. With reference to Table 4, describe the trend in Country X's current account balance between 2019 and 2023. [2 marks]

17. With reference to Table 4, describe the trend in Country X's exchange rate between 2019 and 2023. [2 marks]

18. Explain how the tariffs described in Extract D would affect Country X's current account balance. [4 marks]

19. With reference to Extract D, explain one reason why a depreciating currency might have "mixed effects" on Country X's trade balance. [3 marks]

20. "A persistent current account surplus is always beneficial for an economy." With reference to Table 4 and your knowledge of economics, evaluate this statement. [4 marks]

END OF QUIZ

Check your answers carefully before submitting.

Answers

A-Level Economics H2 Quiz - Data Response: Answer Key and Marking Scheme

Total Marks: 50

Section A: Trend Analysis and Interpretation (Questions 1–5)

1. With reference to Table 1, describe the trend in Arabica coffee prices between 2018 and 2023. [2 marks]

Answer:

Coffee prices showed an overall upward trend from 2018 to 2023, rising from USD 1.10/lb to USD 1.80/lb. [1 mark]
However, the trend was not uniform: prices declined slightly from 2018 to 2019 (USD 1.10 to USD 1.05), then rose sharply from 2020 to 2022 (USD 1.15 to USD 2.10), before moderating to USD 1.80 in 2023. [1 mark]

Marking Notes:

Award 1 mark for identifying the overall upward direction with reference to start and end values.
Award 1 mark for noting the volatility or non-linear pattern (must reference at least one specific fluctuation).
Accept alternative valid descriptions of the trend (e.g., "prices more than doubled before falling back").

2. With reference to Extract A, identify and explain two factors that contributed to the change in coffee prices between 2021 and 2022. [4 marks]

Answer:

Factor 1: Supply-side shock (drought and frost in Brazil). Brazil's severe drought and unexpected frosts damaged coffee crops, reducing the global supply of coffee. This leftward shift in the supply curve caused prices to rise. [2 marks]
Factor 2: Rising global demand. Growing coffee consumption in emerging markets such as China and India (8% annual growth) increased global demand for coffee. This rightward shift in the demand curve further pushed prices upward. [2 marks]

Marking Notes:

Award 1 mark for each factor correctly identified with reference to Extract A.
Award 1 mark for each factor explained using economic reasoning (supply/demand shifts, price mechanism).
Accept alternative valid factors if supported by Extract A evidence.
Do not award marks for factors not mentioned in Extract A.

3. Using a demand and supply diagram, explain how the events described in Extract A affected the equilibrium price and quantity in the global coffee market in 2021–2022. [6 marks]

Answer:

Diagram (3 marks):
- Correctly labeled axes: Price (USD/lb) on vertical axis, Quantity (millions of lbs) on horizontal axis. [1 mark]
- Initial demand (D1) and supply (S1) curves with initial equilibrium (P1, Q1). [0.5 marks]
- Leftward shift of supply curve (S1 to S2) due to drought and frost in Brazil. [0.5 marks]
- Rightward shift of demand curve (D1 to D2) due to rising consumption in emerging markets. [0.5 marks]
- New equilibrium (P2, Q2) clearly labeled, showing higher price. [0.5 marks]
Explanation (3 marks):
- The supply shock (drought/frost) reduced global coffee supply, shifting the supply curve leftward from S1 to S2. This alone would increase price and decrease quantity. [1 mark]
- Simultaneously, rising demand from emerging markets shifted the demand curve rightward from D1 to D2. This alone would increase both price and quantity. [1 mark]
- The combined effect is an unambiguous increase in price (P1 to P2). The effect on equilibrium quantity is indeterminate without knowing the relative magnitudes of the shifts; however, given the severity of the supply shock, quantity likely decreased or remained relatively stable. [1 mark]

Marking Notes:

Diagram must be fully labeled to earn full 3 marks.
Explanation must reference both supply and demand shifts.
Award partial credit for explaining only one shift with correct diagram.
Accept alternative valid reasoning about quantity effects if well-justified.

4. Between 2022 and 2023, coffee prices fell from USD 2.10/lb to USD 1.80/lb. Suggest one possible reason for this decline, with reference to economic concepts. [2 marks]

Answer:

Possible reason: Supply recovery in Brazil as weather conditions normalized, leading to increased coffee production. This rightward shift in the supply curve would reduce equilibrium price. [2 marks]
Alternative reason: Speculative bubble correction, where prices had overshot fundamentals in 2022 and market adjustment brought prices back toward long-run equilibrium levels. [2 marks]

Marking Notes:

Award 1 mark for a plausible reason.
Award 1 mark for linking the reason to economic concepts (supply shift, market adjustment, price mechanism).
Accept any economically sound explanation.

5. "The price of coffee is determined entirely by supply-side factors." With reference to the data in Table 1 and Extract A, evaluate this statement. [4 marks]

Answer:

Arguments supporting the statement: The sharp price increase from 2021 to 2022 coincided with supply shocks (drought and frost in Brazil), suggesting supply-side factors were dominant. The subsequent price decline in 2023 could reflect supply recovery. [1 mark]
Arguments against the statement: Extract A explicitly mentions rising demand from emerging markets (8% annual growth in China and India), indicating demand-side factors also contributed to price increases. The sustained high prices despite supply recovery suggest demand growth remains strong. [1 mark]
Evaluation: While supply shocks caused short-term price spikes, the long-term upward trend in coffee prices reflects both supply constraints and growing global demand. Therefore, the statement is inaccurate; coffee prices are determined by the interaction of both demand and supply factors. [2 marks]

Marking Notes:

Award 1 mark for acknowledging supply-side evidence.
Award 1 mark for acknowledging demand-side evidence.
Award up to 2 marks for balanced evaluation that recognizes the interaction of both forces.
A one-sided answer limited to 2 marks maximum.

Section B: Macroeconomic Data Response (Questions 6–10)

6. With reference to Table 2, compare the relationship between Singapore's unemployment rate and GDP growth rate between 2019 and 2023. [3 marks]

Answer:

There is an inverse relationship between unemployment and GDP growth: when GDP growth was negative (-4.1% in 2020), unemployment rose to its peak (3.0%). [1 mark]
When GDP growth recovered strongly (8.9% in 2021), unemployment fell to 2.7%, and continued declining as GDP growth remained positive in 2022–2023. [1 mark]
However, the relationship is not perfectly proportional: GDP growth of 8.9% in 2021 only reduced unemployment by 0.3 percentage points, while GDP growth of 1.1% in 2023 coincided with the lowest unemployment rate (1.9%), suggesting other factors (e.g., labour market rigidities, policy measures) also influence unemployment. [1 mark]

Marking Notes:

Award 1 mark for identifying the inverse relationship.
Award 1 mark for providing specific data comparisons.
Award 1 mark for noting limitations or nuances in the relationship.
Accept alternative valid observations.

7. Explain how the fiscal stimulus measures described in Extract B would have affected Singapore's unemployment rate in 2021. [4 marks]

Answer:

The Jobs Support Scheme subsidised up to 75% of wages for affected sectors, reducing firms' labour costs. This enabled firms to retain workers they might otherwise have retrenched, directly preventing a rise in unemployment. [2 marks]
By maintaining household incomes, the wage subsidies supported consumer spending, which sustained aggregate demand. This indirect effect helped firms maintain production levels and employment, contributing to the fall in unemployment from 3.0% in 2020 to 2.7% in 2021. [2 marks]

Marking Notes:

Award up to 2 marks for explaining the direct effect on labour retention.
Award up to 2 marks for explaining the indirect multiplier effect on aggregate demand and employment.
Answers must reference Extract B (Jobs Support Scheme) to earn full marks.

Answer:

Diagram (3 marks):
- Correctly labeled axes: General Price Level on vertical axis, Real GDP on horizontal axis. [1 mark]
- Initial AD1 and AS curves with initial equilibrium (P1, Y1) showing below-full-employment output. [0.5 marks]
- Rightward shift of AD curve (AD1 to AD2) due to fiscal stimulus (increased government spending/transfers) and accommodative monetary policy (lower interest rates, exchange rate policy supporting exports). [1 mark]
- New equilibrium (P2, Y2) showing higher real GDP and moderately higher price level. [0.5 marks]
Explanation (3 marks):
- Fiscal stimulus (Jobs Support Scheme, government spending) directly increased aggregate demand by supporting household incomes and consumption. [1 mark]
- Accommodative monetary policy (MAS exchange rate policy) supported export competitiveness and domestic investment, further boosting AD. [1 mark]
- The combined effect shifted AD rightward, increasing real GDP from Y1 to Y2 (economic recovery) and raising the general price level from P1 to P2. Given the economy was likely operating below full capacity in 2020, the output increase was significant with moderate inflationary pressure. [1 mark]

Marking Notes:

Diagram must show AD shift and new equilibrium.
Explanation must reference both fiscal and monetary policy from Extract B.
Award partial credit for explaining only one policy with correct diagram (max 4 marks).

9. With reference to Table 2, calculate the percentage point change in Singapore's unemployment rate from its peak during this period to 2023. [2 marks]

Answer:

Peak unemployment rate: 3.0% (in 2020) [1 mark]
Unemployment rate in 2023: 1.9%
Percentage point change: 3.0 - 1.9 = 1.1 percentage points decrease [1 mark]

Marking Notes:

Award 1 mark for correctly identifying the peak (3.0% in 2020).
Award 1 mark for correct calculation (1.1 percentage points decrease).
Accept "1.1 percentage points" or "1.1 pp" with direction indicated.
Do not award marks for percentage change calculation (which would be approximately 36.7%).

10. "Fiscal policy alone was responsible for Singapore's economic recovery in 2021." With reference to Extract B and Table 2, evaluate this statement. [4 marks]

Answer:

Arguments supporting the statement: The Jobs Support Scheme and other fiscal measures directly supported employment and household incomes, contributing to the sharp GDP recovery (from -4.1% to +8.9%) and falling unemployment (3.0% to 2.7%) in 2021. [1 mark]
Arguments against the statement: Extract B also mentions MAS's accommodative exchange rate policy, indicating monetary policy played a complementary role. Additionally, external factors such as global economic recovery and rebound in trade likely contributed to Singapore's export-driven growth. [1 mark]
Evaluation: While fiscal policy was significant, attributing recovery solely to fiscal measures ignores the role of monetary policy, automatic stabilisers, and external demand. Singapore's recovery was likely the result of multiple factors working in combination. Therefore, the statement is an oversimplification. [2 marks]

Marking Notes:

Award 1 mark for acknowledging fiscal policy's role with evidence.
Award 1 mark for identifying other contributing factors.
Award up to 2 marks for balanced evaluation recognizing the multi-causal nature of recovery.
A one-sided answer limited to 2 marks maximum.

Section C: Policy and Market Dynamics (Questions 11–15)

11. With reference to Table 3, describe the trend in global EV sales between 2019 and 2023. [2 marks]

Answer:

Global EV sales increased substantially from 2.1 million units in 2019 to 13.5 million units in 2023, representing more than a six-fold increase. [1 mark]
The growth was particularly rapid between 2020 and 2022, with sales more than tripling from 3.0 million to 10.2 million, though the rate of increase moderated slightly in 2023. [1 mark]

Marking Notes:

Award 1 mark for stating the overall direction and magnitude.
Award 1 mark for noting the pattern of growth (acceleration then moderation).
Accept alternative valid descriptions with data references.

12. With reference to Table 3, compare the trend in EV sales with the trend in average government subsidies per EV from 2019 to 2023. [3 marks]

Answer:

EV sales increased continuously throughout the period (2.1 to 13.5 million), while average subsidies initially rose from USD 5,000 to a peak of USD 6,000 in 2021, then declined to USD 4,000 by 2023. [1 mark]
The two variables moved in the same direction from 2019–2021 (both increased), but diverged from 2021–2023 (sales continued rising while subsidies fell). [1 mark]
This divergence suggests that factors other than subsidies (e.g., technological improvements, consumer preferences) became increasingly important drivers of EV sales growth in later years. [1 mark]

Marking Notes:

Award 1 mark for describing each trend with data.
Award 1 mark for noting the convergence then divergence pattern.
Award 1 mark for drawing an economic inference from the comparison.

13. Using a demand and supply diagram, explain how the reduction in battery costs (Extract C) would affect the market for electric vehicles. [5 marks]

Answer:

Diagram (2 marks):
- Correctly labeled axes: Price (USD) on vertical axis, Quantity (millions of EVs) on horizontal axis. [0.5 marks]
- Initial demand (D) and supply (S1) curves with initial equilibrium (P1, Q1). [0.5 marks]
- Rightward shift of supply curve (S1 to S2) due to lower production costs. [0.5 marks]
- New equilibrium (P2, Q2) showing lower price and higher quantity. [0.5 marks]
Explanation (3 marks):
- Battery costs represent a significant component of EV production costs. A 60% reduction in battery costs since 2019 lowers the cost of production for EV manufacturers. [1 mark]
- This shifts the supply curve rightward from S1 to S2, as firms are willing and able to supply more EVs at each price level. [1 mark]
- The new equilibrium results in a lower market price (P1 to P2) and higher equilibrium quantity (Q1 to Q2), making EVs more affordable and increasing market penetration. [1 mark]

Marking Notes:

Diagram must show supply shift and new equilibrium.
Explanation must link cost reduction to supply shift and market outcomes.
Award partial credit for incomplete diagrams or explanations.

14. With reference to Extract C, explain one reason why governments might choose to phase out EV subsidies. [2 marks]

Answer:

Reason: The EV market has matured and reached a "tipping point" where consumer demand is becoming self-sustaining. As EVs become price-competitive with conventional vehicles due to technological improvements, subsidies are no longer necessary to stimulate demand. [1 mark]
Economic rationale: Continuing subsidies when the market can function independently represents an inefficient allocation of government resources (opportunity cost) and may lead to market distortions or fiscal burden. [1 mark]

Marking Notes:

Award 1 mark for identifying a valid reason from Extract C.
Award 1 mark for explaining the economic logic.
Accept alternative valid reasons (e.g., fiscal consolidation, avoiding market dependency on subsidies).

15. "The growth in EV sales is primarily driven by government subsidies rather than market forces." With reference to Table 3 and Extract C, evaluate this statement. [4 marks]

Answer:

Arguments supporting the statement: The initial growth in EV sales (2019–2021) coincided with rising subsidies (USD 5,000 to USD 6,000), suggesting subsidies played a significant role in stimulating early adoption. [1 mark]
Arguments against the statement: From 2021–2023, EV sales continued to grow strongly (6.5 to 13.5 million) despite subsidies declining (USD 6,000 to USD 4,000). Extract C notes that battery costs fell 60%, making EVs increasingly price-competitive. This suggests market forces (cost reductions, consumer preferences) became the primary drivers. [1 mark]
Evaluation: While subsidies were important in the early stages of market development, the evidence suggests a transition toward market-driven growth. The statement may have been accurate for the early period but is increasingly inaccurate as the market matures. Government intervention and market forces are complementary rather than mutually exclusive. [2 marks]

Marking Notes:

Award 1 mark for acknowledging the role of subsidies with evidence.
Award 1 mark for acknowledging the role of market forces with evidence.
Award up to 2 marks for balanced evaluation recognizing the evolving relationship.
A one-sided answer limited to 2 marks maximum.

Section D: International Economics Data Response (Questions 16–20)

16. With reference to Table 4, describe the trend in Country X's current account balance between 2019 and 2023. [2 marks]

Answer:

Country X's current account balance declined steadily from a surplus of USD +45 billion in 2019 to USD +8 billion in 2023. [1 mark]
The decline was gradual from 2019–2021 (USD +45bn to +38bn), then accelerated from 2021–2023 (USD +38bn to +8bn), suggesting a worsening trend in the trade position. [1 mark]

Marking Notes:

Award 1 mark for stating the overall direction with start and end values.
Award 1 mark for noting the pattern of decline (acceleration).
Accept alternative valid descriptions.

17. With reference to Table 4, describe the trend in Country X's exchange rate between 2019 and 2023. [2 marks]

Answer:

Country X's currency depreciated against the USD throughout the period, with the exchange rate rising from 1.35 per USD in 2019 to 1.45 per USD in 2023 (requiring more units of domestic currency to purchase one USD). [1 mark]
The depreciation was relatively gradual, with the largest single-year change occurring between 2022 and 2023 (1.42 to 1.45). [1 mark]

Marking Notes:

Award 1 mark for correctly identifying depreciation with data.
Award 1 mark for noting the pattern or magnitude.
Accept "weakening" or "declining value" as equivalent to depreciation.

18. Explain how the tariffs described in Extract D would affect Country X's current account balance. [4 marks]

Answer:

Tariffs imposed by trading partners increase the price of Country X's exports in foreign markets, making them less price-competitive. [1 mark]
This reduces the quantity of exports demanded, decreasing Country X's export revenue (assuming demand is price-elastic enough that the quantity effect outweighs the price effect). [1 mark]
A decline in export revenue, ceteris paribus, reduces the current account surplus (or worsens the deficit), as the trade balance is a major component of the current account. [1 mark]
This is consistent with the data in Table 4, which shows Country X's current account surplus declining from USD +52 billion in 2020 to USD +8 billion in 2023, coinciding with the imposition of trade restrictions mentioned in Extract D. [1 mark]

Marking Notes:

Award 1 mark for explaining the price effect of tariffs.
Award 1 mark for linking to export quantity/revenue.
Award 1 mark for connecting to current account balance.
Award 1 mark for referencing the data in Table 4.
Accept alternative valid explanations (e.g., retaliation effects, trade diversion).

19. With reference to Extract D, explain one reason why a depreciating currency might have "mixed effects" on Country X's trade balance. [3 marks]

Answer:

Reason: A depreciation makes exports cheaper in foreign currency terms, which could increase export quantity and improve the trade balance. However, it also makes imports more expensive in domestic currency terms, potentially increasing the import bill. [1 mark]
Explanation: The net effect depends on the Marshall-Lerner condition—whether the sum of price elasticities of demand for exports and imports exceeds one. If elasticities are low in the short run, the trade balance may initially worsen (J-curve effect) before improving. [1 mark]
Application to Country X: As a major exporter of manufactured goods, Country X may benefit from increased export competitiveness, but if it relies on imported raw materials or intermediate goods, higher import costs could offset export gains, resulting in mixed effects. [1 mark]

Marking Notes:

Award 1 mark for identifying the dual effect (exports vs. imports).
Award 1 mark for explaining the conditions (elasticities, J-curve, or Marshall-Lerner).
Award 1 mark for applying to Country X's context.
Accept alternative valid explanations of mixed effects.

20. "A persistent current account surplus is always beneficial for an economy." With reference to Table 4 and your knowledge of economics, evaluate this statement. [4 marks]

Answer:

Arguments supporting the statement: A current account surplus indicates that a country is earning more from exports than it spends on imports, which can contribute to GDP growth, employment in export sectors, and accumulation of foreign reserves. Country X's surplus (USD +45bn in 2019) suggests strong export competitiveness. [1 mark]
Arguments against the statement: A persistent surplus may indicate structural imbalances, such as under-consumption or excessive saving. It can also lead to trade tensions (as seen in Extract D, where trading partners imposed tariffs on Country X). Additionally, a surplus implies capital outflow, which may represent missed domestic investment opportunities. [1 mark]
Evaluation: The desirability of a surplus depends on its causes and consequences. Country X's declining surplus (USD +45bn to +8bn) may reflect external pressures (tariffs) and currency depreciation. While a moderate surplus can be beneficial, a large persistent surplus may signal imbalances and provoke protectionist responses. Therefore, the statement is an oversimplification; context matters. [2 marks]

Marking Notes:

Award 1 mark for acknowledging benefits of a surplus.
Award 1 mark for identifying potential drawbacks.
Award up to 2 marks for balanced evaluation with reference to Table 4 and economic reasoning.
A one-sided answer limited to 2 marks maximum.

END OF ANSWER KEY