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1 (a) With reference to Figure 2, explain one likely reason for the change in the Chile peso exchange rate between 2013 and 2015 - Edexcel - A-Level Economics A - Question 1 - 2017 - Paper 3
Question 1
1 (a) With reference to Figure 2, explain one likely reason for the change in the Chile peso exchange rate between 2013 and 2015. Figure 2: US dollar per 100 Chile... show full transcript
Worked Solution & Example Answer:1 (a) With reference to Figure 2, explain one likely reason for the change in the Chile peso exchange rate between 2013 and 2015 - Edexcel - A-Level Economics A - Question 1 - 2017 - Paper 3
Step 1
(a) With reference to Figure 2, explain one likely reason for the change in the Chile peso exchange rate between 2013 and 2015.
Answer
Between 2013 and 2015, the value of the Chilean peso against the US dollar likely changed due to fluctuations in copper prices, as depicted in Figure 1. As Chile is heavily reliant on copper exports, a decrease in global copper prices may have led to reduced revenues, weakening the peso. Additionally, economic factors such as inflation or changes in foreign investment could also have influenced the exchange rate.
Step 2
(b) Examine the likely impact of externalities of copper mining on firms and communities within Chile.
Answer
The externalities of copper mining in Chile can have both positive and negative impacts. On the positive side, mining can create jobs and generate economic growth, particularly for firms supplying goods and services to the mining industry. However, negative externalities may include environmental degradation, which could affect agriculture and local communities. Furthermore, health impacts from pollution could place a strain on local healthcare systems, affecting community well-being.
Step 3
(c) Apart from externalities, discuss the problems that Chile faces as a result of dependency on copper mining.
Answer
Chile’s dependency on copper mining poses several challenges. Economic volatility is a significant issue, as fluctuations in copper prices can lead to unstable government revenues. This reliance creates a lack of diversification, making the economy vulnerable to external shocks. Additionally, there can be social issues such as inequality, as wealth generated from mining often does not reach all segments of society. Over-reliance on one sector also hinders the development of other industries, leading to long-term economic challenges.