Economics · 2006 · May · Paper 2 · SL · Question paper

 IB DIPLOMA PROGRAMME PROGRAMME DU DIPLÔME DU BI PROGRAMA DEL DIPLOMA DEL BI M06/3/ECONO/SP2/ENG/TZ0/XX ECONOMICS STANDARD LEVEL PAPER 2 Tuesday 9 May 2006 (morning) INSTRUCTIONS TO CANDIDATES Ÿ Do not open this examination paper until instructed to do so. Ÿ Answer three questions. Ÿ Use fully labelled diagrams and real-world examples where appropriate. 2 hours 2206-5105 11 pages 22065105 M06/3/ECONO/SP2/ENG/TZ0/XX 2206-5105 – 2 – Answer three questions. Each question is worth [20 marks]. 1. Study the extract and table below and answer the questions that follow. Poland joins the EU Œ The Poland that has joined the EU is almost unrecognizable as the Eastern-bloc state of post- World War II Europe. A consumer boom has replaced the queues and shortages and, despite still very low wages, Poland is now, a fully functioning market economy – although the latest analysis by the EU notes a disappointing slowdown in the use of supply-side policies such as privatization.  Joining the EU has meant some economic hardship in the period of transition. The country has been forced to reform its heavy industries, traditionally the backbone of its economy in its Soviet-bloc days. The EU insisted on reductions in subsidies to its coal and steel industries which had been heavily subsidized. This has eliminated many thousands of jobs, particularly in coal. Ž The Government is selling its main steel holding. Steel has had to absorb even heavier restructuring with the loss of 75 % of its workforce from 275 000 employees in 1990 to just over 75 000 now.  Polish farmers, who make up 25 % of voters, are angry and fearful at the thought of being flooded by imports. Their outdated, inefficient farming practices leave them extremely vulnerable. For example, the Polish vodka industry is already 90 % owned by foreign companies.  The private sector is looking at the opportunities presented by Poland’s large, educated workforce and a growing economy. Computer firms, IBM and Hewlett Packard, have both recently indicated their intention to establish data processing plants in the cities of Warsaw and Krakow, while the German airline, Lufthansa announced last month its