Question 22M.3.HL.TZ0.a.iv
| Date | May 2022 | Marks available | [Maximum mark: 2] | Reference code | 22M.3.HL.TZ0.a.iv |
| Level | HL | Paper | 3 | Time zone | TZ0 |
| Command term | Calculate | Question number | a.iv | Adapted from | N/A |
Trade
The main exports of Burundi in 2018 were gold (41.4 %), coffee (17.3 %) and tea (9.5 %), while refined petroleum (17.3 %) was its main import. Although the current account deficit was reduced to 10 % of GDP in 2019, there remains a huge imbalance between exports and imports. Reserve assets do not cover more than one month of imports, while the economy relies on foreign aid and foreign direct investment (FDI) to finance the deficit. The low level of foreign aid is likely to be insufficient to finance the deficit.
On the upside, Burundi has an abundance of minerals, including 6 % of the world’s nickel reserves. It is the only African country producing rare-earth minerals, which are used in many hi-tech products, such as smartphones. The United States (US) has been keen to diversify its supply of rare-earth minerals because of its trade dispute with China.
Figure 1 shows the market for gold in Burundi. Dd and Sd represent the yearly domestic demand and supply functions for gold, while Sw and Sw1 represent the world supply of gold in 2019 and 2020 respectively. The price of gold is measured in US dollars (US$) per ounce (oz). The world price increased from US$1500 per oz to US$1800 per oz between July 2019 and July 2020.
Figure 1
Using the information in Figure 1, calculate the change in the value of Burundi’s gold exports resulting from the increase in the price of gold from US$1500 per oz to US$1800 per oz.
[2]
Initial value = 1000 (70 − 25) × 1500 = 67 500 000
New value = 1000 (85 − 20) × 1800 = 117 000 000
Any valid working (initial or final value) is sufficient for [1].
Change in value = US$117 million − US$67.5 million
= US$49.5 million or US$49 500 000
An answer of 49.5 or 49.5 million or $49.5 million without any valid working is sufficient for [1].
N.B. For full marks to be awarded the response must provide valid working and include correct units.
Responses to this question were extremely poor. It was evident that some candidates were not familiar with the identification of exports on a trade diagram (as introduced in the new syllabus). Furthermore, some candidates who were able to calculate the quantity of exports were not able to multiply by the price in order to calculate the value. It was common to see responses in which candidates had merely calculated the changes in the value of domestic output or where the quantity of gold demanded had been multiplied by the price.
