Question:

3 South America is a large geographical area with millions of microeconomic decision-makers. During a recent pandemic, schools stayed closed for longer than anywhere else in the world. As a result, students received less education. The World Bank estimated that the average student
would earn $24,000 less over their lifetime. Some students may earn only the minimum wage. In
2020, South America had an inflation rate of 6.3% and an economic growth rate of only 1.8%.
(a) Identify the difference between microeconomics and macroeconomics. [2]
(b) Explain how less education can reduce a person’s lifetime earnings. [4]
(c) Analyse how the introduction of a minimum wage could affect unemployment. [6]
(d) Discuss whether or not an economy with a high inflation rate will have a low economic growth
rate. [8]

Sample Answers: