IB Economics HL Unit 3 Macroeconomics Topic Practice

Level

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

1 There is limited understanding.

For a response which is accurate but is limited to one of the two approaches. OR which refers to both approaches in a vague fashion (eg "in the expenditure approach, total spending is calculated").

2 There is clear understanding.

For a clear understanding that in the expenditure approach, total spending on domestic output is summed, whereas in the income approach, incomes earned in the production of domestic output are summed.

A response which states accurately the components of each approach should be fully rewarded ie
expenditure approach =C+I+G+(X-M)
income approach = wages + profits + interest + rent.
However, it is not necessary to state these components in order to earn full marks.

Level

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

1 There is limited understanding.

For a response which conveys the idea that the term relates to effects on the environment.

2 There is clear understanding.

For a response which explains that green GDP is GDP adjusted for the effects of production on the environment.

Multiplier $=\frac{1}{0.04+0.15+0.06}$

Any valid working is sufficient for [1].
=4

An answer of 4 without workings is sufficient for [1].
If a candidate states $=\frac{1}{0.25}$
=4
this should be fully rewarded.

[4]
Level Marks
0 The work does not reach a standard described by the descriptors below. ..... 0
1 The written response is limited. ..... 1-2
For a response which explains that spending by one person represents income to another OR that an increase in government spending leads to a series of increases in income.
2 The written response is clear. ..... 3-4
For a response which explains that spending by one person represents income to another. Thus an increase in government spending leads to a series of additional increases in income. Therefore the eventual increase in GDP will be greater than the initial increase in government spending.
A response which makes effective use of an algebraic explanation to

demonstrate the successive increments in national income may be fully

rewarded.

(i) Calculate the rate of unemployment in Country Z. ..... [2]
Ue rate $=\frac{66000}{260000} \times 100$ ..... [1]
Any valid working is sufficient for [1].

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

1 The written response is limited.

For one difficulty clearly explained or for two difficulties explained in a vague manner.

2 The written response is clear.

For two difficulties explained clearly. Difficulties may include:
- "hidden" unemployment - underestimation as a result of individuals dropping out of the labour market, this could be because they are discouraged from looking for work
- underemployment - underestimation as a result of part time workers who would have preferred to be working full time
- overestimation as a result of the inclusion in the official unemployment statistic of those working in the parallel economy
- the measure is an average, and therefore ignores disparities between groups in the economy.

Any other valid response.

Define the term economic growth indicated in bold in the text (Text D, paragraph 2).

Level

Marks

0

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

1

Vague definition

The idea that output of a country increases.

2

Accurate definition

An increase in (an economy's) real GDP/total real output (over time).

Using information from Table 4, calculate Bhutan's real gross domestic product (GDP) in USD in 2021.
$(2539.55 / 279) \times 100$
Any valid working is sufficient for [1]
= 910232974.91 or 910232975 or 910.23 million or $9.1 \times 10^{8}$

Any valid working is sufficient for [1] (e.g. if x 100 has been neglected).
For full marks to be awarded, the response must provide valid working and include correct units where necessary.

=3245.62

An answer of 3245.62, 0.0032 million or 3246 is sufficient for [1] Workings are not required.

Nominal GNI for 2021=2539.55-155.64=2383.91
Nominal GNI for 2008=1227.81-34.02=1193.79

Any valid working (either value for 2021 or 2008) is sufficient for [1]

Change in GNI = 2383.91-1193.79
= 1190.12 million

An answer of 1190.12 million without any valid working is sufficient for [1]

For full marks to be awarded, the response must provide valid working.

Candidates who label diagrams incorrectly can be awarded a maximum of [3]. For AD/AS, the vertical axis may be Average (General) Price Level, CPI, or Price Level. The horizontal axis may be real output, real national output, real income, real national income, real GDP or real Y. A Keynesian AS is permissible. Abbreviations are acceptable. A title is not necessary.

Alternatively, students may use an AD/AS diagram and illustrate an increase SRAS/LRAS due to infrastructure/roading improvements lowering the cost of production or education/healthcare expenditure improving productivity/efficiency/ quality or quantity of resources to show the impact on real GDP.

Level

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

1 Vague answer.

One reason is stated.

2 Accurate answer.

Two reasons are stated.
Reasons may include:
- different income earners may experience consumption patterns
- consumption patterns change frequently
- there may be wide regional differences in prices
- any other valid response.

NB Candidates may use terms such as "substitution bias", "outlet bias" and "quality bias" but such terms are not necessary to earn full marks.

Level

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

1 The written response is limited.

For an AD/AS diagram showing a decrease in aggregate demand and a fall in real output and APL or an explanation such as those offered below.

2 The written response is accurate.

For an AD/AS diagram showing a decrease in aggregate demand and a fall in real output and APL and an explanation such as those offered below.

Reasons may include:
- deflation discourages spending by consumers who postpone purchases in the expectation of lower prices. As a result, aggregate demand decreases, reducing the level of output and employment
- deflation discourages borrowing as the real value of debt increases. This may reduce the level of investment and consumer spending, and thus aggregate demand, reducing the level of output and employment as a result
- as the real value of debt increases, bankruptcies may result, with the closure of firms creating greater unemployment
- any other reasonable explanation should be rewarded.

If a candidate draws an accurate diagram but explains only that AD decreases, APL decreases (hence deflation) and GDP decreases (hence greater unemployment) then a maximum of [3] may be awarded.
Candidates who incorrectly label diagrams can be rewarded with a maximum of [3].

For AD/AS, the vertical axis may be price level, average price level, or inflation.
The horizontal axis may be output, real output, national output, real national output, national income (Y), or GDP. Any appropriate abbreviations, such as APL, CPI, RNO or RNY are allowable. A title is not necessary.
NB do not penalise candidates who label the vertical axis APL followed by a currency (eg APL($))

Level ..... Marks

0 The work does not reach a standard described by the descriptors

below.

0
1 Vague distinction. ..... 1
The idea that there is a difference between "fairness" and "sameness" or an accurate outline of the meaning of either equity or equality.
2 Accurate distinction. ..... 2
Equity refers to an income distribution which is fair, while equality refers to the extent to which income is distributed equally.

Level Marks
0 The work does not reach a standard described by the descriptors below. ..... 0
1 The written response is limited. ..... 1-2
For an explanation that an indirect tax is regressive, as the tax represents a higher proportion of income for lower income households and therefore may be considered inequitable/unfair or an appropriate example is provided and explained.
2 The written response is accurate. ..... 3-4
For an explanation that an indirect tax is regressive, as the tax represents a higher proportion of income for lower income households and therefore may be considered inequitable/unfair and an appropriate example is provided and explained.
An appropriate example might be numerical or might relate to a type of tax (eg a named indirect tax such as VAT) or to a named product (eg cigarettes).
NB It is not essential that the term "regressive" is used, providing that the meaning is demonstrated clearly.