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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) Explain one likely reason for the change in the Chile peso exchange rate between 2013 and 2015.
Answer
One likely reason for the change in the Chile peso exchange rate between 2013 and 2015 is the fluctuations in copper prices, which directly impact Chile's economy as it is heavily reliant on copper exports. During this period, a decline in global copper prices led to a decrease in export revenues, causing the Chile peso to depreciate against the US dollar. This can be observed in Figure 2, where the exchange rate shows a shift, reflecting reduced demand for the Chilean currency and increased demand for foreign currencies.
Step 2
(b) Examine the likely impact of externalities of copper mining on firms and communities in Chile.
Answer
The externalities of copper mining in Chile can lead to both positive and negative impacts on firms and communities. On the positive side, the mining sector provides significant employment opportunities and contributes to economic growth, boosting local businesses. However, negative externalities include environmental degradation, such as water scarcity and pollution, which can harm public health and local agriculture. Communities may experience a loss of quality of life due to these environmental challenges, affecting their long-term sustainability.
Step 3
(c) Discuss the problems that Chile faces as a result of dependency on copper mining.
Answer
Chile faces several problems stemming from its dependence on copper mining. Firstly, economic vulnerability arises due to fluctuations in global copper prices, which can lead to significant revenue losses and impact public services. Additionally, this reliance creates a lack of diversification in the economy, limiting growth in other sectors. Socially, dependency on mining can exacerbate inequalities, as wealth becomes concentrated among mining companies and those connected to the industry, leaving marginalized communities without adequate resources or opportunities for development.