Each question is introduced by stimulus material. In your answer you may refer to this material and/or to other examples that you have studied. India has experienced a relatively high economic growth rate in recent years. This growth has been driven by increases in government spending and exports, including exports of textiles. India's unemployment rate has, however, increased. The government is concerned that trying to reduce unemployment may increase India's inflation rate. Explain the possible opportunity cost to India of exporting more textiles.

Economics

IGCSE&ALevel

CAIE

Exam No：0455_m21_qp_22 Year：2021 Question No：2(b)

Answer:

Logical explanation which might include:
Opportunity cost is the (next) best alternative (1) forgone (1).
Textiles that have been exported might have been sold on the
home market (1) may have increased choice (1) lowered
price (1).
Resources may have been moved to producing the textile
exports / resources used to produce textiles could have been
used to produce other products (1) output / exports of other
products may have been reduced (1) these products may
provide more revenue / lose revenue from not exporting these
products (1).

Knowledge points:

1.3.1 definition of opportunity cost

1.3.2 the influence of opportunity cost on decision making

6.4.1 Structure：The components of the current account of the balance of payments

Answer:

Knowledge points:

Solution:

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