• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Paper 2 Practice HL

Extracts from this document...


1. Use a diagram to explain how the incidence (burden) of a tax is shared among producers and consumers when an ad valorem indirect tax is placed on a good which has relatively inelastic demand. An indirect tax is a tax set on goods or services such as value added tax (VAT) in the UK. However, such can be divided in several types of taxes. One, for instance, is an ad valorem tax; tax added as a percentage of the value of the good or service. When referring to the incidence of a tax, it is referred to the tax burden on the tax payer. Such taxes are paid by consumers and producers, depending not only on its prices but, consequently, depending on the demand and supply of that certain good. When an ad valorem tax is placed on a good which has a relatively inelastic demand (goods such as alcohol which demand will have almost no reaction to a change in price), the tax burden is shared among producers and consumers. ...read more.


in comparison to consumers who will pay a higher proportion of it (CKEF). 3. Explain how an increase in government spending can lead to crowding out. Government spending is a budget on how money within an economy will be used to provide public goods or services such as street lighting, hospitals, public schools, etc. In other words, it is the budget or plan set by a government to invest within its own economy. Governments spending tend to be greater than income from taxes, profits, rents and interest which therefore leads to an increase in the demand for borrowing in the form of, for example, loanable funds. A loanable fund is money which is available for lending to individuals and institutions. This increase in government spending and borrowing will have some effect on the rate of interest; in this case, an increase of it. ...read more.


Abroad investment may enter a less developed country (LDC) by the incoming of multinationals (MNC's). MNC's are companies operating in a number of countries while having its headquarters in another specific one. MNC's bring many advantages for less developed countries such as increase in technology, employment and choice. This allows for the country to increase its growth and development yet they also have negative consequences. For example, if profits generated by the MNC leaves the country, or if the MNC itself decides to leave from that certain country, then this may result in a negative net property income from abroad which will therefore lead GNP to be lower than GDP. Therefore, in this case, GDP is higher than GNP. However, it may happen that GNP has a greater value than GDP in some LDC's where there is a positive net property abroad. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our GCSE Economy & Economics section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related GCSE Economy & Economics essays

  1. Recession, Tax Cuts and Budget Deficits.

    of a recession; current employment, current industrial production, real manufacturing and trade sales, and current real personal income less transfers. The start of the 2001 recession was marked by a slight decline in the current employment and a large decrease in industrial production compared to previous recessions.

  2. Retailing In India - A Government Policy Perspective

    Food retailing: Competition among stores is limited because each counter store typically has an established clientele based on personal relationships and, often, credit. This situation is aggravated by a lack of competitive pressure from modern formats. Non-food retailing: On the non-food side too, competition among retailers is moderate.

  1. Is residential property in the UK a good investment?

    On the face of it this investment seems very good but after a little examination it becomes clear that it is in fact deceiving. The reason why this investment may seem deceiving is that a 100% yield sounds as if it would be very profitable but in fact when one

  2. Liberalization: where it has lead us and where it is headed

    For instance, in the name of "openness" and "transparency", India's telecom sector was opened to international bidding. But the tender requirements were framed in a manner that no domestic company could ever win a contract without tying up with an international telecom giant.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work