IB Economics HL 3.7.4 Demand Side and Supply Side Interactions Questions

Answers may include:
- definitions of fiscal policy, economic growth and potential output
- theory to show how government spending on investment in physical and human capital and infrastructure, and/or government provision of incentives to invest through reductions in taxes, result in an increase in LRAS and potential output. Reference may be made to the indirect effects of creating a favourable environment for investment
- diagram to show an increase in LRAS and an increase in potential output
- examples of where this may have been the case.
N.B. Candidates who consider only the impact on AD and who do not look at long-term economic growth should not be awarded above level 2.

Assessment Criteria

Part (a) 10 marks
Level ..... Marks
0 The work does not reach a standard described by the descriptors below. ..... 0
1 There is little understanding of the specific demands of the question. Relevant economic terms are not defined.
There is very little knowledge of relevant economic theory. There are significant errors. ..... 1-3
2 There is some understanding of the specific demands of the question. Some relevant economic terms are defined.
There is some knowledge of relevant economic theory. There are some errors. ..... 4-6
3 There is understanding of the specific demands of the question.
Relevant economic terms are defined.
Relevant economic theory is explained and applied. Where appropriate, diagrams are included and applied. Where appropriate, examples are used. There are few errors. ..... 7-8
4 There is clear understanding of the specific demands of the question. Relevant economic terms are clearly defined.
Relevant economic theory is clearly explained and applied. Where appropriate, diagrams are included and applied effectively. Where appropriate, examples are used effectively. There are no significant errors. ..... 9-10