By Sonia A. Sanjay (printsbysonia)
9708/22/M/J/18- Data Response
1ai. Calculate the level of aggregate demand in Thailand in 2014 (1 mark)
AD = C + I + G + (X-M)
= 243 + 98+69+(280-253)
= $437 billion (USD)
ii. In which category of expenditure would the various infrastructure projects be
placed (1 mark)
Investment Spending (I)
b. Explain how a fall in the rate of interest would be likely to affect expenditure on
i. consumption (3 marks)
Consumption is consumer expenditure on goods & services which includes durable,
non-durable, tangible and intangible goods. A fall in interest rates will mean that the
cost of borrowing will also fall. This acts as an incentive to spend by taking loans
from the bank. Consequently, a fall in the rate of interest will likely increase
expenditure on consumption.
ii. exports (3 marks)
Exports are goods sold to foreign customers. A fall in interest rates will mean that the
cost of borrowing will fall, allowing firms to purchase more raw materials to produce
exported goods. However, if there is only a domestic fall in interest rates, the level of
exports bought from foreign nations is likely to be the same. On the other hand, a fall
in the interest rate will tend to depreciate the currency (the bank) which would make
exports more competitive and cheaper, thereby increasing the level of export
expenditure.
c. Explain how changes in any three demand factors might account for the greater
rate of growth in numbers of visitors into Thailand from China than from other
countries. (6 marks)
Firstly, income influences demand as it directly affects effective demand. An
increased ability to pay will lead to an increase in demand. Relating to the extract, if
China alone experiences an increase in their national income level, it will allow them
to spend more on luxury foods services such as a holiday in Thailand. There would
be more visitors from China only if China experiences an increase in its national level
of income. This could occur as a result of China’s economic growth.
Secondly, the price/availability of related goods/services are another factor in
influencing demand. For instance, the complements of a trip to Thailand (such as
By Sonia A. Sanjay (printsbysonia)
9708/22/M/J/18- Data Response
1ai. Calculate the level of aggregate demand in Thailand in 2014 (1 mark)
AD = C + I + G + (X-M)
= 243 + 98+69+(280-253)
= $437 billion (USD)
ii. In which category of expenditure would the various infrastructure projects be
placed (1 mark)
Investment Spending (I)
b. Explain how a fall in the rate of interest would be likely to affect expenditure on
i. consumption (3 marks)
Consumption is consumer expenditure on goods & services which includes durable,
non-durable, tangible and intangible goods. A fall in interest rates will mean that the
cost of borrowing will also fall. This acts as an incentive to spend by taking loans
from the bank. Consequently, a fall in the rate of interest will likely increase
expenditure on consumption.
ii. exports (3 marks)
Exports are goods sold to foreign customers. A fall in interest rates will mean that the
cost of borrowing will fall, allowing firms to purchase more raw materials to produce
exported goods. However, if there is only a domestic fall in interest rates, the level of
exports bought from foreign nations is likely to be the same. On the other hand, a fall
in the interest rate will tend to depreciate the currency (the bank) which would make
exports more competitive and cheaper, thereby increasing the level of export
expenditure.
c. Explain how changes in any three demand factors might account for the greater
rate of growth in numbers of visitors into Thailand from China than from other
countries. (6 marks)
Firstly, income influences demand as it directly affects effective demand. An
increased ability to pay will lead to an increase in demand. Relating to the extract, if
China alone experiences an increase in their national income level, it will allow them
to spend more on luxury foods services such as a holiday in Thailand. There would
be more visitors from China only if China experiences an increase in its national level
of income. This could occur as a result of China’s economic growth.
Secondly, the price/availability of related goods/services are another factor in
influencing demand. For instance, the complements of a trip to Thailand (such as
By Sonia A. Sanjay (printsbysonia)
