IB Economics HL 3.6.5 Effectiveness of fiscal policy Question Bank

For a limited explanation of one reason, award a maximum of [1].
For an accurate explanation of one reason or a limited explanation of two reasons, award a maximum of [2].

For providing an accurate explanation of one reason and a limited explanation of a second reason, award a maximum of [3].

For providing two accurate reasons, award a maximum of [4].

Level

Marks

0

The work does not meet a standard described by the descriptors below.

1

The written response is limited.

1-2

Reasons may include:

- An increase in Government spending is direct or can target specific sectors.

- Spending by the government will often increase confidence levels.

- There may be a multiplier effect.

- Lowering income taxes increases disposable incomes.

Any other valid reason.

2

The written response is accurate.

3-4

Accurate explanations may include:

- An increase in Government spending (G) is direct since G is a component of aggregate demand or since infrastructure or subsidies can be targeted towards key areas.

- Spending by the government will often directly increase employment (or decrease unemployment) and thus confidence levels.

- There may be a multiplier effect as a rise in income leads to a rise in consumption.

- Lowering income taxes increases disposable incomes and thus may positively affect spending as well as confidence levels.

Any other valid and explained reason.