ConceptConceptDocsDocuments

IB Economics HL 3.3 Macroeconomic Objectives Question Bank

Evaluate macroeconomic objectives and policy trade-offs across growth, employment, prices, equity, sustainability and time.

Syllabus
First assessment 2022
Course
Economics HL
Level
HL

Covered syllabus points

3.3.1—Economic growth3.3.2—Consequences of economic growth3.3.3—Low unemployment3.3.4—Low and stable inflation3.3.5 (HL)—Weighted price index3.3.6—Deflation and disinflation3.3.7—Inflation versus unemployment3.3.8 (HL)—Sustainable government debt3.3.9 (HL)—Phillips curve and macroeconomic trade-offs3.3.10—Conflicts between macroeconomic objectives

3.3 Macroeconomic objectives question 1

[Maximum number: 1]

Table 1 shows the gross domestic product (GDP) of the United States of America (USA) economy from 2020 to 2023. The USA is not the fastest growing economy in the world, but it is the largest. It also has the largest budget deficit and the largest current account deficit in the world. As a result, the actions of its central bank, the Federal Reserve, always make news.

Table 1

Table 1

Using Table 1, calculate the annual GDP growth rate for 2023. Enter your result in Table 1.

The Federal Reserve has a target inflation rate of 2 %.
The US Bureau of Labor Statistics, however, recorded that the inflation rate from January 2023 to January 2024 was 3.1 \%, well above the target rate. Over the same period, households in the USA could borrow money from a commercial bank at a nominal interest rate of 8.5 %.

3.3 Macroeconomic objectives question 2

[Maximum number: 6]

The data in Table 2 refer to Kanyaland, a small, open, developing economy in 2019. All data are in billions of Kanyaland dollars (K$).

Table 2

Table 2

Question (a)

(a)

Explain two possible positive consequences of economic growth in Kanyaland.

[ 4 ]

Question (b)

(b)

Table 3 shows the values of the consumer price index (CPI) between 2016 and 2020 in Kanyaland.

Table 3

Table 3

Using Table 3, calculate the rate of inflation in 2017 and in 2018.

[ 2 ]

3.3 Macroeconomic objectives question 3

[Maximum number: 13]

The information in Table 1 refers to Country A (base year: 2011).

Table 1

Table 1

Question (a)

(a)

Calculate the inflation rate for 2014 and for 2015. Enter your results in Table 1.

[ 2 ]

Question (b)

(b)

Calculate the unemployment rate for 2012 and for 2013. Enter your results in Table 1.

The central bank of Country A aims to achieve price stability, defined as "inflation below but close to 2 % annually".

[ 2 ]

Question (c)

(c)

Explain two reasons why low and stable inflation is desirable.

[ 4 ]

Question (d)

(d)

Using the data in Table 1 to support your answer, identify two reasons why many economists would consider Country A's economy to be performing poorly in 2012.

[ 2 ]

Question (e)

(e)

Outline the meaning of the natural rate of unemployment, with reference to the long-run Phillips curve and types of unemployment.

[ 2 ]

Question (f)

(f)

Using the information in Table 2 for Country B, calculate the rate of economic growth between 2014 and 2015.

The data in Table 2 suggest that Country B may have attracted significant foreign direct investment (FDI).

[ 1 ]
All question bank results loaded