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. In 2019, the government of France proposed a 3% tax on the revenue of large firms that advertise and sell products online. This tax may lead to a redistribution of income. There are concerns that this tax may also lead to a reduction in France's export of services as firms affected may leave France. However, the government hopes that supply-side policy measures will encourage such firms to stay in France. Analyse the economic effects of a reduction in a country's export of services.

Economics

IGCSE&ALevel

CAIE

Exam No：0455_w21_qp_21 Year：2021 Question No：2(c)

Answer:

Coherent analysis which might include:
As export of services decreases, total exports will decrease (1) total
demand decreases (1) less inflation (1) lower economic growth / lower
GDP (1).
Less export of services, less demand for service workers (1) less job
opportunities / higher unemployment (1). Higher current account
deficit / less current account surplus (1) reduces ability to buy imports
(1) lower standards of living (1).

Knowledge points:

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

Answer:

Knowledge points:

Solution:

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