Practise evaluating whether growth conflicts with environmental protection, using data on GDP, pollution, climate effects and policy trade-offs.
In 2022 the Government of India introduced new legislation with the aim of reducing pollution. It is predicted that this will cause India's real GDP to increase at a slower rate. Evaluate the view that there will always be conflicts between macroeconomic objectives. Refer to a country of your choice in your answer.
Indicative content guidance
Answers must be credited by using the level descriptors (below) in line with the general marking guidance.
The indicative content below exemplifies some of the points that candidates may make, but this does not imply that any of these must be included. Other relevant points must also be credited.
Knowledge, Application and Analysis ( 12 marks) - indicative content
- Understanding of macroeconomic objectives
- Identification of relevant macroeconomic objectives
Conflicts include:
- Economic growth and the protection of the environment: measures to reduce pollution e.g. increased taxes on polluters would increase costs and prices resulting in a fall in real incomes and therefore a slower rate of economic growth (as predicted in India)
- Economic growth and inflation: measures to reduce inflation e.g. deflationary monetary policy would increase cost of borrowing reducing consumption/investment and AD, resulting in a fall in real output and therefore slower rate of economic growth e.g. the UK
Other conflicts:
- Economic growth and income equality
- Economic growth and current account of the balance of payments
- Inflation and unemployment, including the short-run Phillips curve
- Unemployment and the current account of the balance of payments
- Unemployment and the protection of the environment
NB Award a maximum of Level 3 for answers with no reference to a country in their answer
NB Award a maximum of Level 3 for answers that consider only one conflict
Level
Mark Descriptor
0 No rewardable material.
Level 1
1-3
Level 2
4-6
Level 3
7-9
Demonstrates accurate knowledge and understanding of economic terms, principles, concepts, theories and models.
Ability to apply knowledge and understanding to some elements of the question. Some evidence and contextual references are evident in the answer.
Analysis is clear and coherent. Chains of reasoning in terms of cause and/or consequence are evident, but they may not be developed fully, or some stages are omitted.
Level 4
10-12
Demonstrates accurate and precise knowledge and understanding of economic terms, principles, concepts, theories and models. Ability to link knowledge and understanding in context using appropriate examples which are fully integrated to address the broad elements of the question.
Analysis is clear, coherent, relevant and focused. The answer demonstrates logical and multi-stage chains of reasoning in terms of cause and/or consequence.
Evaluation (8 marks) - indicative content
- In developed economies, economic growth could imply employment of green and clean technology;
Consumers may increase demand for eco-friendly products so stimulating AD
- Growth may lead to higher government revenues, providing scope to improve public transport and hence reduce pollution
- If it is supply-side growth (rather than demand-side) then the impact will not be inflationary
- Full employment / low unemployment may not be inflationary if AS is rising more quickly than AD
- Significance of the current state of the economy and its implications for elasticity of the LRAS curve/proximity to full employment (full output)
- Initial state and stability of inflation/deflation
- The rate of actual economic growth in comparison to the growth of the productive capacity
- Full employment/low unemployment should not conflict with growth
- Short-run unemployment from introduction of new technology
- Impact on inequality depends on the extent of the effectiveness of the current redistributive policies of the government
- Impact on the environment depends on the extent of the effectiveness of the government's current environmental policies
- Extent to which the economic growth is in tertiary sector or in primary and secondary sectors
- Current account of balance of payments may improve if it is export-led economic growth e.g. Singapore
- Current account of balance of payments may improve if economic growth is generated through increase in productivity (such as through investment) resulting in a shift in LRAS to the right
Level
Mark
Descriptor
0
No rewardable material.
Level 1
1-3
Identification of generic evaluative comments.
No supporting evidence/reference to context.
No evidence of a logical chain of reasoning.
Level 2
4-6
Evidence of evaluation of alternative approaches.
Some supporting evidence/reference to context.
Evaluation is supported by a partially developed chain of reasoning.
Level 3
7-8
Evaluation recognises different viewpoints and/or is critical of the evidence, leading to an informed judgement.
Appropriate reference to evidence/context.
Evaluation is supported by a logical chain of reasoning.
Question
Evaluate possible causes of deflation.