Economics · 2013 · November · Paper 2 · HL · Question paper

N13/3/ECONO/HP2/ENG/TZ0/XX ECONOMICS HIGHER LEVEL PAPER 2 Tuesday 5 November 2013 (morning) INSTRUCTIONS TO CANDIDATES  Do not open this examination paper until instructed to do so.  You are not permitted access to any calculator for this paper.  Section A: answer one question.  Section B: answer one question.  Use fully labelled diagrams and references to the text/data where appropriate.  The maximum mark for this examination paper is [40 marks]. 1 hour 30 minutes 8813-5104 9 pages © International Baccalaureate Organization 2013 8813510 4 N13/3/ECONO/HP2/ENG/TZ0/XX 8813-5104 – 2 – SECTION A Answer one question from this section. 1. Study the extract and data below and answer the questions that follow. Bolivia reacts to global economic change  During the twentieth century, Bolivia experienced deteriorating terms of trade due to declines in prices of commodity exports on which the economy was highly dependent. Bolivia diversified its exports, but has remained highly dependent on commodity exports. These include natural gas, which accounts for nearly 40 % of export earnings and also silver and zinc.  Bolivia succeeded in avoiding recession during the global economic downturn in 2009, though its rate of growth was affected by lower demand for natural gas from Brazil and lower prices for its key export products. Growth began again in 2010 due to the recovery of commodity prices and the global economy (Figure 1).  Strong inflationary pressures have appeared with the recovery, partly due to the removal of fuel subsidies. A key government policy objective is to hold down inflation and imported input costs. About 80 % of Bolivia’s imports are used by the manufacturing sector in various industries. Since late 2010 the government has adopted a managed float to achieve appreciation of the Bolivian Boliviano (the Bolivian currency).  Bolivia’s current account surplus reached a maximum in 2008–2009 (Figure 2) due to the recovery of commodity prices, which led to an improvement in its terms of trade (Figure 3). The resulting decrease in the