Assess the likely impact on the Rwandan economy of the change in aid received between 2017 and 2018
Edexcel A-Level Economics Paper 2 June 2021 Extract
With reference to the information provided, assess the likely impact on the Rwandan economy of the change in aid received between 2017 and 2018. (10 marks)
- One main impact of the decrease in aid could be that economic growth might slow down.
- Aid usually refers to assistance given from developed countries to less economically developed countries (LEDCs), and this can be in many forms.
- Figure 1 shows a decrease in aid received from roughly $103 per capita in 2017 to $91 per capita in 2018.
- As the government receive less aid, there is more pressure on them to fund spending on services such as healthcare and education.
- This means the government have to cut spending in other areas or potentially raise taxes.
- This can lead to a decrease in aggregate demand, and therefore a fall in real gdp.
- As income per capita falls, people can afford less goods and services and satisfy fewer needs and wants, so living standards could fall.
- However, the data shows that the Rwandan economy grew in every year from 2008 and 2018, including a growth rate of roughly 7.6% in 2018.
- This suggests that the Rwandan economy was sustaining itself well and becoming less dependent on foreign aid.
- As the economy has been growing consistently, it means that people's incomes per capita has been increasing and therefore people are less dependent on the government for the provision of services.
- Additionally, people are able to pay more taxes as their income rises, which reduces the government's dependence on aid.
- Absolute poverty fell from 59% to 39% between 2001 to 2014.
A-Level Economics Tutoring
I offer one-to-one and small group A-Level Economics tutoring for students across the UK and internationally. With 87+ five-star Google reviews and tutoring experience since 2017, I specialise in helping students understand difficult concepts and improve their exam technique.