Question:

2 Liechtenstein is a high‐income economy in the middle of Europe. The country’s low tax rates and
low levels of regulation make it an attractive place for foreign firms and individuals to open bank
accounts. Firms’ costs of production in Liechtenstein are high but this is slightly offset by low
indirect taxation.
(a) Identify two types of cost to a firm. [2]
(b) Explain two roles of commercial banks for firms. [4]
(c) Analyse the causes of differences in the level of income between countries. [6]
(d) Discuss whether or not low tax rates benefit an economy. [8]

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