Albania is a country in Southeastern Europe with an estimated population of about 2.8 million in 2022. The Albanian economy has been transitioning from a centrally planned system to a market-based system and has experienced positive real GDP growth in recent years. Tourism is a significant contributor to Albania’s GDP, and the government has intensified efforts to promote the country’s attractions along its Adriatic and Ionian coasts.
In 2022, Albania’s unemployment rate was around 12%, partly due to structural challenges in the economy. The government operates a progressive personal income tax system, with rates ranging from 0% up to 23%. Corporate income tax is set at 15%. Value-added tax (VAT) on most goods and services stands at 20%.
Albania’s trade balance remains negative, as the country’s main exports (textiles, footwear, and mineral fuels) have not kept pace with imports (machinery, food, and manufactured goods). The government has embarked on several infrastructural projects to attract foreign investment and reduce transport costs, including a newly announced US$200 million investment in highways. Economists estimate the marginal propensity to consume (MPC) in Albania to be about 0.8.
Table 1: Selected Macroeconomic Indicators for Albania
Year
Real GDP (billion US$)
Unemployment Rate (%)
Gini Coefficient
2021
15.2
11.5
0.30
Table 2: Tourism Data in Albania (2022)
Price per Tour Package (EUR)
Quantity Demanded of Tour Packages (thousands)
400
140
450
120
(a)
Using the information provided in Table 1, the percentage change in Albania’s real GDP between 2021 and 2022.
[2]
(b)
The Albanian government’s US$200 million highway project is expected to raise national income through the Keynesian multiplier, assuming the marginal propensity to consume (MPC) is 0.8. the total increase in national income that could result from this project.
[2]
(c)
Using the data in Table 2, the price elasticity of demand (PED) for Albania’s tour packages when the price increases from EUR 400 to EUR 450.
[2]
(d)
Using the data in Table 1, the absolute change in the unemployment rate between 2021 and 2022.
SL & HLPaper 1
(a)
the relationship between the current account and the exchange rate.
[10]
HLPaper 3
Poland has experienced steady economic growth in recent years, supported by a diverse industrial base, significant agricultural production, and growing service sectors. The country is a major producer of apples, exporting large quantities to neighboring European countries. The government imposes several taxes, including value-added tax (VAT) and progressive personal income tax. In 2022, policymakers considered pursuing expansionary monetary policies to stimulate the economy amid signs of a possible slowdown.
Table 1 shows selected macroeconomic data for Poland from 2019 to 2022.
SL & HLPaper 2
Economic Challenges and Opportunities in Zambia
Zambia, a landlocked country in sub-Saharan Africa, has undergone significant economic transitions over the past decade. Copper exports remain the backbone of the economy, accounting for approximately 70% of its total export revenue. However, fluctuations in global commodity prices have created vulnerabilities in Zambia’s balance of payments and fiscal accounts. For instance, between 2017 and 2022, the price of copper varied between US4,500andUS9,800 per metric ton, leading to irregular export earnings and complicating government revenue planning.
High public debt has been a major concern, with external debt reaching roughly US$31 billion in 2021. Consequently, the government has sought financial assistance from multilateral institutions and introduced fiscal consolidation measures. In the same year, inflation peaked at 18%, fueled by exchange rate depreciation and elevated food prices. Although measures like partial subsidies on maize and fertilizers have aimed to stabilize the cost of living, policymakers acknowledge that these interventions put additional strain on the national budget.
HLPaper 3
Indonesia is the largest economy in Southeast Asia. In 2021 its nominal GDP reached US$ 1190 billion, up from US$ 1050 billion in . Over these two years the GDP deflator () rose from to . Inflation, as measured by the consumer price index, averaged percent in . The labour force of million is distributed roughly as follows: percent in agriculture ( percent of GDP), percent in industry ( percent of GDP) and percent in services ( percent of GDP).
IB Economics Topic 4.6 Balance of Payments Questionbank
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Using the text/data provided and your knowledge of economics, recommend a policy which the government of Albania could implement in order to reduce unemployment.
Poland’s Gini coefficient stands at 0.305, reflecting moderate income inequality. Estimates suggest that the average marginal propensity to consume (MPC) in Poland is approximately 0.75. Table 3 provides recent data about the Polish apple market.
Price (PLN per kg)
Quantity Demanded (tonnes)
3.00
200,000
3.30
170,000
In 2021, the total export revenue from Polish apples stood at 500 million PLN. By 2022, this figure had risen to 600 million PLN. These trends highlight Poland’s continued importance in the international apple market.
(a)
Using information from Table 1, the rate of real GDP growth from 2021 to 2022.
Using the information provided, the change in the value of Poland’s apple export revenue from 2021 to 2022.
[2]
(e)
the term “Gross Domestic Product”.
[2]
(f)
Using an AD/AS diagram, how an expansionary monetary policy might affect real output (GDP) and the price level in Poland.
[4]
(g)
Using data from Table 1, Poland’s real GDP in 2022 (in 2019 prices).
[2]
(h)
Using information from the text, two ways in which moderate income inequality (as indicated by a Gini coefficient of 0.305) might affect Poland’s economic growth.
[4]
(i)
Using the text/data provided and knowledge of economics, recommend a policy which could be implemented by the Polish government to help reduce income inequality in Poland.
[10]
Domestic firms in Zambia often face high borrowing costs, limiting investment in key industries, including construction and agribusiness. According to recent data, real GDP growth decelerated from 4.1% in 2018 to 1.7% in 2021. While much of Zambia’s potentially arable land remains underutilized, rural poverty rates surpass 55%, suggesting that inadequate infrastructure and limited access to credit hamper the agricultural sector. Furthermore, Zambia’s Gini coefficient, estimating income inequality, stands at approximately 0.58 among the highest in the region. This inequality is exacerbated by a mismatch of skills in the labor market, leading to structural unemployment that particularly affects youths under age 25.
International trade has been a double-edged sword for Zambia. On the one hand, membership in regional trade blocs has encouraged cross-border trade in agricultural products and promoted competition among local businesses. On the other hand, heavy reliance on mining exports leaves the country vulnerable to commodity price shocks. To foster diversification, the government has pursued industrial policies encouraging value-added manufacturing in textiles and processed foods, although limited infrastructure and power outages hinder large-scale industrialization.
Zambia’s policymakers have begun to explore new approaches to reduce poverty. In urban areas, social protection programs such as cash transfers targeting low-income households aim to mitigate the effects of rising living costs. Yet in many rural districts, subsistence farming prevails, locking households in a poverty cycle characterized by low income, underinvestment in education and health, and persistently low productivity. The government’s Seventh National Development Plan highlights improvements in primary health care, vocational training, and extension services for farmers as key factors to break this cycle.
To stabilize the currency, the Bank of Zambia occasionally intervenes in foreign exchange markets using its limited international reserves. Nonetheless, persistent current account deficits and debt service obligations create pressure on the Zambian kwacha, which depreciated from ZMW 10 per US dollar in 2019 to around ZMW 17 in 2022. Critics argue that such interventions may only offer temporary relief while adding to the central bank’s costs.
TABLE 2: Social and Development Indicators for Zambia
Indicator
2018
2019
2020
2021
Population (million)
17.3
17.9
18.4
18.9
Poverty Rate (%)
50.4
49.0
54.0
55.6
Gini Coefficient
0.57
0.58
0.57
0.58
Unemployment Rate (%)
12.4
12.7
14.2
14.0
Net Official Development Aid (US$)
1.1bn
1.3bn
1.5bn
1.4bn
Despite these challenges, Zambia’s long-term potential remains compelling. Policymakers see hope in sectors like tourism, renewable energy, and horticulture. International donors and investors increasingly emphasize partnership programs that link local firms to global value chains. If managed carefully, debt restructuring alongside enhanced fiscal responsibility could pave the way for more stable growth, employment creation, and poverty reduction. Sustained investments in human capital especially education and health care are deemed essential for breaking the poverty cycle and ensuring inclusive development.
an AD–AS diagram showing how the rise in inflation shown in Table 1 could affect macroeconomic equilibrium.
[3]
(e)
Using a demand and supply of currency diagram, how Bank of Zambia interventions to support the kwacha may affect Zambia’s exchange rate.
[4]
(f)
Using a production possibilities curve (PPC) diagram, how limited investment in human capital might influence Zambia’s long-term economic capacity.
[4]
(g)
Using a labor market diagram, how structural unemployment in Zambia can persist due to the mismatch of skills mentioned in the text.
[4]
(h)
Using a poverty cycle diagram, how rural subsistence farming perpetuates poverty in Zambia, referencing the case study.
[4]
(i)
Using the case study and Tables 1–2, and your knowledge of economics, the extent to which Zambia’s reliance on copper exports could hinder or promote its economic growth and development.
[15]
2020
2015=100
102
110
4.4
2021
141
40
12
23
38
37
50
In 2021 the Indonesian rupiah appreciated by 8 percent against the US dollar, driven by strong capital inflows.
Palm Oil Market and Trade
Palm oil is Indonesia’s largest agricultural export. Indonesia is a small country in world palm-oil markets, so it takes the world price as given. In 2021 there was a global supply shock, causing the world price to fall from US$ 800 to US$ 600 per tonne.
Table 2 shows Indonesia’s domestic demand at those two world prices (domestic supply is not binding at world prices).
Table 1: Indonesia—GDP Data
Year
Nominal GDP (US$ billion)
GDP deflator (2015=100)
2020
1050
102
2021
1190
110
Table 2: Domestic Demand for Palm Oil
Price (US$ per tonne)
Quantity demanded (million tonnes)
800
2.0
600
3.0
Fiscal Policy and the Multiplier
The government of Indonesia plans a fiscal stimulus of IDR 50 trillion. The marginal propensity to consume (MPC) in the economy is estimated at 0.75.
Income Inequality and Development
Despite rapid growth, income inequality remains high. Table 3 compares Indonesia to two neighbours.
Table 3: Development and Inequality Indicators (2021)
Indicator
Indonesia
Malaysia
Philippines
Gini coefficient
0.38
0.40
0.42
% of population below national poverty line
9.8
5.6
16.6
Human Development Index (HDI)
0.714
0.804
0.718
Adult literacy rate (%)
95.7
94.6
98.2
Female labour force participation (%)
54.5
55.8
47.8
Youth unemployment rate (%) (ages 15–24)
17.9
10.3
14.8
(a)
Using Table 1, the real GDP growth rate of Indonesia between 2020 and 2021.
Using Table 2, the price elasticity of demand for palm oil in Indonesia when the world price falls from US$ 800 to US$ 600 per tonne.
[2]
(d)
the change in the value of Indonesia’s palm oil exports (in US$ billion) resulting from the fall in the world price, assuming export quantity equals the quantities shown in Table 2.
[2]
(e)
the term “fiscal multiplier”.
[2]
(f)
why an appreciation of the currency may reduce a country’s export competitiveness.
[4]
(g)
Using information from Table 1, Indonesia's real GDP in 2021 (in 2015 prices). Show your working.
[2]
(h)
With reference to Table 3, two ways in which high income inequality might act as a barrier to economic development in Indonesia.
[4]
(i)
Using the data and your knowledge of economics, recommend and one policy that the government of Indonesia could implement to reduce income inequality.
