Professional Documents
Culture Documents
Syllabus
Level
Year ,
Paper
Question
Mark Scheme
Aggregate
Demand
SL
May 2010,
P1
Aggregate
Demand
SL
May 2010,
P1
Syllabus
Level
Year ,
Paper
Question
Aggregate
demand
SL
May 2009,
P2
Aggregate
demand &
aggregate
supply
SL
May 2010,
P2
Aggregate
demand &
aggregate
supply Inflation
Aggregate
demand &
aggregate
supply unemployment
Aggregate
demand &
supply
supply-side
policies
Aggregate
demand &
unemployment
May 2009,
P1
Mark Scheme
Examiners should be aware that candidates may take a different approach
which if appropriate, should be rewarded.
Effective evaluation may be to:
consider short-term versus long-term consequences
examine the impact on different stakeholders
discuss advantages and disadvantages
prioritize the arguments.
An explanation that it is the total demand for all goods and services
produced in an economy OR This comprises C+I+G+(XM) is also
sufficient.
For drawing a correctly labelled AD/AS diagram showing a shift to the
right (increase) in the AD curve and for explaining that I (private
investment) and M (imports) are components of aggregate demand
(C+ +G + XM) and an increase in spending on I and a decrease in
spending on M will increase AD. (Diagram + 1 component = [3 marks])
SL
May 2010,
P2
HL
May 2009,
P3
SL
May 2009,
P1
Syllabus
Level
Year ,
Paper
Question
Mark Scheme
deficient unemployment discussion of problems of supply-side measures,
e.g. it may lead to the exploitation of workers, the cost and effectiveness
of government managed training, the time lags associated with the
application of supply-side policies.
Examiners should be aware that candidates may take a different approach
which if appropriate, should be rewarded.
Effective evaluation may be to: consider short-term versus long-term
consequences examine the impact on different stakeholders discuss
advantages and disadvantages prioritize the arguments.
For drawing a business cycle diagram indicating the phases of the cycle and for
explaining that Germany was in recession in 2008 as it recorded negative growth in
successive quarters. (If only recession is mentioned then [1 mark] may be awarded
for the explanation.)
Business Cycle
SL
May 2011,
P2
Definitions
SL
May 2011,
P2
Definitions
Demand-side
and supplyside policies
SL
SL
May 2010,
P2
May 2010,
P2
Syllabus
Level
Year ,
Paper
Question
Mark Scheme
reduced indirect and direct taxation may successfully increase consumer
expenditure and stimulate the economy
however, if not carefully targeted, increased government spending may
leak
from the circular flow of income through increased savings and/or import
spending
the large budget deficit in Ireland may prevent further government
borrowing and reduce the scope for aggregate demand stimulation
(paragraph )
reduced interest rates may allow businesses to invest more and employ
more people
reduced interest rates may not stimulate increased investment by
businesses because of pessimistic expectations during a crisis.
Evaluation of supply-side policies:
a definition of supply-side policies
an AD/AS diagram showing a rightward shift of the LRAS function
wage restraint through reduction of union power may add flexibility to
the
labour market (paragraph )
wage restraint may be conducive to social instability (industrial action)
that
may further worsen the economic slowdown
reducing unemployment benefits
social consequences of reducing benefits (poverty, inequality)
decrease in income tax may provide incentives for workers to work more
decrease in income tax has a limited effect on highly-paid workers as
they
opt for an increase in leisure
labour market flexibility will allow market forces to set wages and lower
costs for businesses
deregulation may have severe safety or environmental consequences
interventionist policies, such as increased training/education,
encouraging
R+D, the provision of infrastructure, and improved information flows may
be high cost and involve serious opportunity costs.
Overall evaluation:
demand-side polices have a macroeconomic focus
demand-side policies may be more effective in times of cyclical
downturns
demand-side policies are flexible in timing and focus
demand-side policies are difficult to implement with limited fiscal
resources
supply-side policies have a microeconomic focus
time lags may reduce the impact of any supply-side policy in the short
term
in the long run, supply-side policies may improve efficiency and assist
international competitiveness.
Examiners should be aware that candidates may take a different approach
which if appropriate, should be rewarded.
If there is no direct reference to the text/data, then candidates may not be
Syllabus
Level
Year ,
Paper
Question
Mark Scheme
rewarded beyond level 2.
Effective evaluation may be to:
consider short-term versus long-term consequences
examine the impact on different stakeholders
discuss advantages and disadvantages
prioritize the arguments.
Fiscal policy
HL
May 2010,
P3
Fiscal Policy
SL
May 2011,
P1
Syllabus
Fiscal Policy
Level
SL
Year ,
Paper
May 2011,
P1
Question
Mark Scheme
Fiscal Policy
SL
May 2011,
P2
Syllabus
Level
Year ,
Paper
Question
Mark Scheme
the government response has been hesitant, slow and not large enough to outweigh
the impact of the global economic crisis (figures for the first stimulus package of 12
billion euros are proportionally small) (paragraphs and )
many of the measures will not have an impact until 2010 (paragraph )
increased saving by consumers may reduce the impact of increased government
spending
increased demand for goods may be satisfied by using existing stocks of produced
goods
the export sector may not be assisted by the spending
the planned deficit budgets will require increased government borrowing which will
increase public debt
the increased government spending may cause a sharp increase in inflation when
recovery begins in 2010 (paragraph ).
Effective evaluation may be to:
consider short-term versus long-term consequences
examine the impact on different stakeholders
discuss advantages and disadvantages
prioritize the arguments.
HL
November
2010, P2
Fiscal policy
and monetary
policy
HL
May 2010,
P1
Syllabus
Level
Year ,
Paper
Question
Mark Scheme
AD moving to the right causes inflation on the vertical part of the AS curve
the inappropriateness of lower interest rates/higher government spending/
lower taxation in dealing with real-wage or natural unemployment
demand-side measures effective against demand-deficient unemployment
supply-side measures to deal with unemployment
the problems associated with increased government spending (running a
budget deficit)
the problem of inelastic response of consumption and investment to lower
interest rates
the problem of time lags.
Examiners should be aware that candidates may take a different approach
which if appropriate, should be rewarded.
Effective evaluation may be to:
consider short-term versus long-term consequences
examine the impact on different stakeholders
discuss advantages and disadvantages
prioritize the arguments.
Fiscal policy
and Supplyside policy
SL
November
2010, P1
Fiscal Policy
Crowding out
HL
May 2011,
P2,
3. A government decides to
introduce a major increase in its
spending programmes. Explain
how this may lead to crowding
out effects.
May 2009,
P2
Income
inequalities
Syllabus
Income
Inequality
Level
HL
Year ,
Paper
May 2011,
P1
Question
Mark Scheme
Income
Inequality
Income
HL
HL
May 2011,
P1
May 2010,
Syllabus
Year ,
Paper
Question
Mark Scheme
inequality
P2
Inflation
May 2009,
P1
May 2010,
P2
Inflation
Level
HL
Inflation
SL
May 2009
10
Syllabus
Level
Year ,
Paper
Question
Inflation cost
push
SL
November
2010, P2
Macroeconomic
performance
HL
May 2009,
P3
Mark Scheme
productivity growth (paragraph ) increased government charges for the
environment and land (paragraph ).
Candidates who incorrectly label diagrams cannot be rewarded with full
marks.
Examiners must be aware that candidates may take a different approach
which if appropriate, should be rewarded.
If there is no direct reference to the data, then candidates may not be
rewarded beyond level 2.
Effective evaluation may be to: consider short-term versus long-term
consequences examine the impact on different stakeholders discuss
advantages and disadvantages prioritize the arguments.
For drawing a correctly labelled AD/AS diagram, which shows a leftward
shift of SRAS and higher price level and for explaining that wages are a
cost of production and that higher wages will lead to higher production
costs which will be passed on in the form of higher prices leading to cost
push inflation.
Responses may include:
Positives for Russia: Russia has exhibited rising growth rates throughout
the period 20022006 ranging between 5 % in 2002 to above 10 % in
20052006 unemployment in Russia is hovering around 7 % and dropping,
significantly below Polands.
Negatives for Russia: high income inequality (paragraph ) high degree of
corruption may result in less economic growth high degree of commodity
dependence (gas/oil etc.) (Russia has come to depend on a small number
of companies in the natural resource area (paragraph )) rising export
revenues from these sectors may have contributed to its growth but also
to a high current account surplus (between 8 % and 12 % of GDP) which
has exerted pressure on the ruble to appreciate and thus eroded the
competitiveness of other export oriented industries this type of growth is
not sustainable and is risky as any downturn in the world economy will
immediately lower Russian growth inflation has also been high (higher than
Polands but dropping from a high of 16 % in 2002 down to slightly less
than 12 % in 2006 which could undermine growth in the long run as nonoil investments may be hurt.
Positives for Poland: growth rates are rising to around 4 % per annum
which is satisfactory for a transition economy and may be more sustainable
than Russia strengthened property rights and monetary controls, privatized
and modernized its private sector which encouraged economic growth,
employment and income generation inflation has been kept a good levels
between 1 % and 4 % even though the drop in 2006 to less than 1 % may
warn of the risk of deflation.
Negatives for Poland: unemployment has been very high (above 12 %
throughout the period) but at least seems to be decreasing the high
unemployment may be the result of both tight policies as inflation has
been kept low but also of rigidities in the labour market (data and
(paragraph )); it may thus include both a cyclical and a large structural
component the current account deficit has ranged between 2 and 4 % of
GDP so it is not a problem.
Candidates could make a judgment on the importance of factors
contributing to the strong/weak economic performance of Russia and
11
Syllabus
Level
Year ,
Paper
Question
Monetary
Policy
HL
November
2010, P3
Monetary
policy
SL
November
2010, P2
Mark Scheme
Poland or they could compare the two economies and make a judgment as
to which economy has performed better, justifying their judgment.
Responses may include:
Negative consequences:
may move to a recession (paragraph )
consumer confidence will fall further (paragraph )
C and I will fall, affecting AD (paragraph )
unemployment will increase further (paragraph )
household spending will fall as debt repayments increase
the exchange rate may increase, harming export competitiveness
rise in business costs, which may cause cost push inflation
negative wealth effects.
Positive consequences:
inflation may fall
an increase in the exchange rate may lead to cheaper imports of raw
materials, semi-finished goods, and finished goods, further reducing
inflation
savings may increase.
Effective evaluation may be to:
consider short-term versus long-term consequences
examine the impact on different stakeholders
discuss advantages and disadvantages
prioritize the arguments.
Responses should include:
an explanation of tight monetary policy.
Possible positive consequences include:
a reduction in the inflation rate (Figure 2)
an appreciation of the currency, making imports cheaper.
Possible negative consequences include:
a lower rate of economic growth (Figure 1)
a worsening of the current account deficit as the exchange rate increases
(Figure 3)
increased unemployment (Figure 4)
a fall in the growth rate of per capita income (paragraph )
a reduction in the rising entrepreneurship (paragraph )
changes in the distribution of income.
Effective evaluation may be to:
consider short-term versus long-term consequences
examine the impact on different stakeholders
discuss advantages and disadvantages
prioritize the arguments.
Neo-classical
HL
November
12
Syllabus
Level
economics
Year ,
Paper
Question
Mark Scheme
2010, P2
neo-classical aggregate
demand/aggregate supply model,
explain the short-term and long-term
effects of a rise in aggregate demand
when a country is at full
employment.
Neo-classical
economics
SL
November
2010, P2
For drawing a correctly labelled AD/AS diagram which shows AD and SRAS
intersecting to the right of LRAS and for explaining that if AD increases
beyond potential output, the effect would be inflation.
Teacher note: once the capacity of the economy is reached further
increases in aggregate demand cannot be met by increases in aggregate
supply. Consequently inflation occurs firms raise their prices across the
economy and the price level thus increases.
Supply-side
Policies
HL
May 2011,
P2
Supply-side
Policies
HL
November
2010, P1
13
Syllabus
Level
Year ,
Paper
Question
Mark Scheme
Supply-side
Policies
HL
November
2010, P1
Supply-side
policies
SL
November
2010, P1
14
Syllabus
Level
Year ,
Paper
Question
Mark Scheme
examine the impact on different stakeholders
discuss advantages and disadvantages
prioritize the arguments.
Unemployment
HL
May 2010,
P1
Unemployment
HL
May 2009,
P3
Unemployment
SL
May 2011,
P2
Unemployment
SL
May 2009,
P1
Unemployment
SL
May 2009,
P2
Unemployment
SL
May 2009,
P2
15
16